The market has been rough on shares of publicly traded consultants lately. As one of the market leaders, Accenture (NYSE:ACN) is no exception. Despite continued growth on both the top and bottom lines, Accenture shares were trading only about 6% above their 52-week lows before the market opened on Friday.
Based on results reported Thursday evening, investors may want to ignore the market's current opinion of Accenture. Although third-quarter revenue and new bookings may have seemed a bit light, revenue still rose 7% (in local currencies), adjusted operating income was up 5%, and reported net income grew 45% for the quarter.
While consulting revenue increased about 4% (again, in local currencies), outsourcing revenue grew 12%. Top-line growth was soft in the communications, high-tech, and government segments. However, financial services remained strong, and groups such as products and resources also turned in respectable performances.
Importantly, management addressed many of the issues that bedeviled second-quarter results. The British NHS contract is back under control, and cost overruns and staffing issues have been largely resolved.
In fact, it looks like Accenture is about to make a major new commitment to staffing. Recognizing the growth and margin potential of hiring more workers in Asia, the company plans to add between 11,000 and 31,000 employees in places like India, China, and the Philippines. This initiative could certainly save the company money since wages and benefits are relatively lower in these countries, and it would also ensure better responsiveness to Asia-based clients.
Although its year-to-date performance is basically flat compared to last year, Accenture continues to generate considerable free cash flow. Through these first nine months, the company has logged over $1.1 billion (versus about $1.2 billion a year ago), and share repurchases continue. Management indicated that the board is considering instituting a dividend as well.
In my opinion, Accenture looks well-suited for patient investors. Management seems more than capable of continuing the company's slow but steady growth while producing generous amounts of cash flow.
Consulting and outsourcing will have their ups and downs over the years, but Accenture will likely remain a market leader for the foreseeable future.
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At the time of publication, Fool contributor Stephen Simpson held no financial position in any companies mentioned.
