Accenture’s “new” tech investments pay off

Accenture’s “new” tech investments pay off

Revenue from digital, cloud and security-related services continues to rise

Accenture’s third-quarter revenue and profit came in above Wall Street estimates as the consulting and outsourcing services provider benefited from its plan to boost investments in digital and cloud services.

Shares of the company, which also raised its full year adjusted profit forecast, were up about five per cent at US$162.87 in early trading.

Revenue from its digital, cloud and security-related services, which the company terms as "the New", made up about 60 per cent of total revenue for the first time.

Accenture CEO Pierre Nanterme said that "the New" has now become the core of company's business.

“I would say all our New babies have the potential to grow successfully for many years," Nanterme said on a conference call.

The Dublin, Ireland-based company has spent more than $3 billion over the last three years on some 70 acquisitions to boost its digital and cloud services in order to compete better with Cognizant and IBM - it has made investments of over US$450 million in acquisitions this year.

Accenture's third-quarter beat was "driven by very strong broad-based revenue growth and healthy operating margin", Cowen & Co analyst Bryan Bergin said.

Evercore ISI analyst David Togut pointed to continued market share gains in North America and Europe, where revenue grew 11 per cent and 22 per cent respectively. Evercore raised its PT on Accenture by US$2 to US$186 after the results.

The company raised its forecast for full year adjusted earnings per share to between US$6.66 and US$6.71, from between US$6.61 to US$6.70.

Accenture forecast current-quarter revenue between US$9.8 billion and US$10.05 billion, the midpoint of which was slightly below average analyst estimate of US$10.01 billion, according to Thomson Reuters.

Net income attributable to the company rose to US$1.04 billion in the quarter ended 31 May from US$669.5 million a year earlier. It reported earnings of US$1.60 per share, compared with US$1.05 a year earlier.

Excluding items, the company earned US$1.79 per share, above analysts' estimates of US$1.72 per share.

The company's revenue rose 15.8 per cent to US$10.84 billion, beating estimates of US$10.04 billion. Revenue before reimbursements, or net revenue, was up 16.3 per cent to US$10.31 billion.

(Reporting by Munsif Vengattil in Bengaluru; Editing by Shailesh Kuber)

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