On Jun 27, we issued an updated research report on Accenture plc ACN.
The company recently delivered better-than-expected results for the third quarter of fiscal 2016. Moreover, revenues increased on a year-over-year basis due to increased focus on the Consulting and Outsourcing business and new bookings. The company also gave an encouraging fourth-quarter outlook and an upbeat revenue guidance for fiscal 2016.
Accenture’s solid performance across the insurance, banking and healthcare markets reflects strong demand for its services, thereby boosting long-term growth prospects. The company has been steadily gaining traction in its Outsourcing business, driven primarily by the increase in demand for technology that can improve operating efficiencies and cut costs.
The upward trend continued through the third quarter, with Outsourcing revenues growing 6% in local currency on a year-over-year basis. The improvement resulted mainly from rising demand for Accenture’s outsourcing solutions supported by most of its operating industry groups across all geographic regions.
Furthermore, amid the growing need for digital marketing, we are encouraged by Accenture’s efforts to enhance its digital marketing capabilities through acquisitions. So far this year, the company has made five major buyouts – dgroup, Maglan, OPS Rules, Formicary and CRMWaypoint.
In 2015 too, the company had acquired several businesses, of which the important ones included Tquila UK, Axia Limited, Gapso, PacificLink Group, Brightstep and Javelin Group. Even earlier, in 2014, the company had made four major acquisitions, Reactive Media Pty Ltd., Hytracc Consulting, Enkitec and i4C Analystics.
These acquisitions have enabled Accenture to enter new markets, diversify and broaden its product portfolio, and maintain its leadership position. Going forward, such acquisitions are expected to contribute significantly to the company’s revenue stream.
However, intensifying competition from Cognizant Technology Solutions CTSH and International Business Machines Corporation IBM, an uncertain macroeconomic environment and a strained IT spending scenario may deter growth to some extent.
Accenture has a Zacks Rank #3 (Hold). A better-ranked stock in the Consulting industry is FTI Consulting Inc. FCN, sporting a Zacks Rank #1 (Strong Buy).
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