Calling someone a "consultant" seems about as vague as walking up to Shaquille O'Neal and saying, "Gee, you're tall, Shaq." I was talking to an IT specialist last night, and we both agreed that consultants are specialists that allow a company to focus on what it does best. The great demand for consultants these days has increased productivity for companies but has put a strain on consulting firms to efficiently complete companies' non-core tasks.
One such organization is Accenture (NYSE:ACN), which is one of the planet's largest consulting firms. The company reported third-quarter earnings of $0.37 per share today that were in line with the analysts' estimate and $0.09 better than last year's results. Accenture's five divisions -- Communications & High Tech, Financial Services, Government, Resources, and Products -- helped produce a 21% increase in revenues. Consulting revenues currently make up about 63% of the company's revenues, with the remaining 37% dedicated to outsourcing revenues.
In an industry where business can look like chain-saw juggling, Accenture has been successful in making the balancing act between present and future demand look like child's play. A case in point: An outsourcing downfall caused new bookings to drop 35% in the third quarter, but the company signed a five-year contract with the Department of Homeland Security a month ago worth as much as $10 billion.
Demand for outsourcing and consulting continues to accelerate as competitors such as Electronic Data (NYSE:EDS), IBM (NYSE:IBM), Computer Sciences (NYSE:CSC), and BearingPoint (NYSE:BE) continue to fight for every speck of non-core business. With so many companies complaining about rising health-care and other benefits costs for its employees, outsourcing and consulting have become effective ways for companies to trim excess costs and still get the job done.
Accenture shares, which are currently trading at about 20 times the expected earnings for fiscal 2005 of $1.37, are moving in line with the company's expected growth rate. However, following the firm's first significant growth in consulting revenues in nearly two and a half years combined with the Homeland security contract, the shares look quite attractive here.
Fool contributor Phil Wohl spent more than 12 years on Wall Street and now concentrates his writing on more fictional characters. He has no stake in any firm mentioned above.
