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Accenture Trims Profit Forecast as Margins Come Under Pressure

Accenture Trims Profit Forecast as Margins Come Under Pressure

By Reuters | Updated: 27 June 2014 12:38 IST

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Accenture Plc, a consulting and outsourcing services provider, cut the top end of its full-year earnings forecast as margins come under pressure, taking the shine off a rebound in its consulting business that boosted quarterly revenue.

Accenture's shares, which have been trading around their life-high, fell as much as 3.9 percent in volatile trading on Monday.

The company said it expects full-year operating margin at the lower end of its previously forecast range of 14.3-14.5 percent.

Analysts have said that Accenture is facing increasing pricing pressure from rivals such as International Business Machines and others amid sluggish business spending.

"I think now you are seeing that lower profitability on some contracts continues to weigh on margins," Atlantic Equities analyst Christopher Hickey told Reuters.

Accenture said it now expects full-year earnings to be in the range of $4.50-$4.54 per share, compared with $4.50-$4.62 earlier.

Analysts on average were expecting earnings of $4.53 for the full-year, according to Thomson Reuters I/B/E/S.

The company's total operating expenses for the quarter rose 7.5 percent to $7.06 million.

Consultancy rebound
Accenture reported a better-than-expected 7.5 percent rise in quarterly net revenue, led by a rebound in demand for its consulting services.

Hickey said the company was benefiting from its newer business offerings and several large contracts it had signed earlier.

Revenue in the consultancy business rose 5.7 percent in the third quarter compared with a 1 percent decline in the second quarter, highlighting a recovery in the unit that accounts for a little over a half of the company's total net revenue.

Outsourcing revenue rose 9.6 percent, accounting for 48 percent of total net revenue. In the IT outsourcing business, it competes with India's Infosys Ltd and Tata Consultancy Services.

Accenture forecast revenue of between $7.45 billion and $7.70 billion for the fourth-quarter. Analysts on average were expecting $7.56 billion, according to Thomson Reuters I/B/E/S.

"(Accenture) is generally well positioned to capture more than their fair share of discretionary spending and ongoing cost reduction spending," Hickey added.

Gartner forecast in April that it expects worldwide IT spending to total $3.8 trillion in 2014, a 3.2 percent increase from 2013.

Accenture's net income rose to $881.8 million, or $1.26 per share, in the third quarter ended May 31 from $874.1 million, or $1.21 per share, a year earlier.

Analysts had expected earnings of $1.21 per share. Net revenue, or revenue before reimbursements, rose 7.5 percent to $7.74 billion, beating the average analyst estimate of $7.55 billion.

Accenture's shares fell to a low of $79.77 but pared some of those losses to trade down 1 percent at $82.13 by mid-day.

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