Talks of a slowing economy and a possible recession are dominating the headlines, but Accenture (ACN -1.17%), a global consulting giant, doesn't seem to have received the memo. The company defied the challenging macro environment yet again, and produced another quarter of outstanding results. Shares of Accenture have taken a beating with the downturn in the broader market, but that seems like an opportunity for savvy investors to add this long-term market beater to their portfolio.
A dominant industry leader is getting even stronger
Since its debut to the public markets in July 2001, Accenture has steadily emerged as a leading global professional services company. Accenture helps businesses develop strategies to grow revenue and operate more efficiently, and adopt modern innovations and technologies to get ahead of the competition.
What truly separates Accenture is its unparalleled breadth and depth of services. Its expertise across all company functions and specialized skills in various industries makes it very difficult for rivals to compete, especially on large, lucrative enterprise-scale solutions. More and more enterprises are seeking digital and operational transformations spanning multiple groups and in compressed timeframes. With its 710,000 employees based in over 50 countries and serving clients in 120 countries, Accenture is uniquely positioned to help with such large endeavors.
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Accenture's scale gives it a tremendous advantage over its competition. And the company continues to extend that lead. Discussing the results of the recently reported quarter, CEO Julie Sweet said that Accenture grew sales nearly three times as fast its industry peers and further expanded its market share.
Well-rounded execution focused on all stakeholders
Despite concerns about economic conditions, for the recently reported fiscal 2022 third quarter (ending on May 31, 2022), Accenture beat its own revenue guidance. Revenue reached $16.2 billion, a jump of 27% in local currency (22% in USD) over a year ago. Year-to-date revenue for fiscal 2022 has grown at the same rate of 27% in local currency (24% in USD) year over year. In other words, Accenture is able to sustain its strong growth momentum.
What's more impressive is that Accenture is growing its top line while expanding its bottom line. Operating income improved to $2.6 billion, a 23% increase over the same period last year, and the operating margin was 16.1%, an expansion of 10 basis points. Earnings per share was $2.79, a 16% increase from $2.40 for the third quarter last year. The company also produced a free cash flow of $2.87 billion, an increase of 28% over $2.24 billion for the same period last year. Improving profitability demonstrates the company's scalable business model and is a reflection of its disciplined execution.
Accenture's success goes far beyond just the financial numbers. The company was recently recognized as a top 10 place to work in nine countries -- representing 76% of its workforce. In the U.S., the company jumped 38 spots to rank sixth on Fortune's 100 best companies to work for in 2022. These recognitions reflect Accenture's steadfast commitment to its people.
Hiring and retaining top talent is central to success in the consulting business. Accenture, with its focus on creating an employee-centric culture, is further strengthening its global brand. This strong reputation attracts best-in-class talent to the company. Top talent produces high value for its clients, which in turn continue to feed Accenture more work, creating a virtuous business cycle.
Likely to replicate its success for years to come
Accenture has delivered over 163% returns over the past five years, more than double the 75% returns of the benchmark S&P 500 index. A similar trend is true over the past 10 years (Accenture earned 539% vs. the S&P 500's 258%).
In today's challenging macro environment, businesses are desperately looking to cut costs and find inexpensive ways to grow. And Accenture is perfectly suited to help them by adopting modern technologies and automation. Despite an expected slowdown in the economy and businesses holding back their spending in the coming quarters, Accenture estimates it will grow next quarter's revenue by 20%-24% and close the year with revenue growth of 25.5%-26.5% over the past year. The company also expects to expand its profits. This shows Accenture's resilience as a business.
The company's scale, highly valued global brand, and excellent execution are likely to extend its winning ways for years to come. Together, these qualities make Accenture an excellent investment. And a discount of about 30% on its share price from its all-time high about six months ago is icing on the cake.
