Accenture (ACN 2.48%) stock fell 8% through 10 a.m. ET Thursday despite exceeding expectations in its earnings report for the fiscal second quarter of 2025.
Analysts had forecast Accenture would earn $2.81 per share on $16.6 billion in sales. In fact, Accenture earned $2.82 per share on sales of $16.7 billion for the period ended Feb. 28.
NYSE: ACN
Key Data Points
Accenture Q2 earnings
Not all the news was good. While revenue grew 5% year over year, Accenture noted that new bookings, which can foreshadow future revenue trends, actually declined 3% in the quarter.
On the plus side, for now, revenue is still growing, and profits are, too. Accenture's operating profit margin expanded 50 basis points to 13.5%. Combined with the revenue growth, that helped Accenture grow per-share profits 7% year over year.
Best of all, free cash flow for the quarter came in at a strong $2.7 billion, up 35% from last year's fiscal Q2.
Is Accenture stock a buy?
Guidance also looks decent. Despite the decline in bookings, Accenture only narrowed revenue guidance, saying revenue will grow 5% to 7% this year. Thus, Accenture remains on track to hit its revenue number. Accenture similarly narrowed on earnings, predicting full-year profit of $12.55 to $12.79 per share.
And that may be the problem.
Objectively speaking, Accenture's narrowing raised the bottom of the earnings target range by $0.12 per share -- which is good news. Unfortunately, at the midpoint of guidance, Accenture is forecasting about a nickel less than the $12.72 per share that Wall Street had forecast for this year, as The Fly pointed out today.
Investors seem to value that nickel very highly, and lament its absence.
As for me, I'm more worried about valuation. At $203 billion in market capitalization, Accenture stock costs more than 20 times trailing free cash flow and more than 26 times trailing earnings. Yet long-term earnings growth is forecast at only about 9% annually, and even short-term, 2025 growth will be only 11%.
In my mind, that makes Accenture stock overpriced. If I owned it, I'd probably sell it, too.
