Accenture plc ACN is benefiting from its cloud capabilities as well as consulting businesses.
ACN’s earnings and revenues for 2022 are expected to improve 5.9% and 4.3%, respectively, from the corresponding year-ago reported figures.
Factors That Augur Well
Accenture has been steadily gaining traction in both of its outsourcing and consulting businesses. These are backed by high demand for services which can improve operating efficiencies and save costs.
On the outsourcing front, the company continues to witness strong demand to assist clients with the operation and maintenance of digital-related services and cloud enablement. In fourth-quarter fiscal 2022, Accenture’s net revenues from outsourcing business increased 16% in U.S. dollars and 23% in local currency.
On the consulting front, the company experiences strong demand for digital, cloud and security-related services. In fourth-quarter fiscal 2022, Accenture’s net revenues from consulting business increased 14% in U.S. dollars and 22% in local currency.
Accenture’s strategy of enhancing its cloud capabilities through acquisitions and partnerships is a step in the right direction. This is evident from a recent forecast by Gartner which reveals that the worldwide end-user spending on public cloud services is likely to grow 20.7% in 2023 to $591.8 billion. This is higher than the 18.8% growth forecast for 2022. Therefore, considering the growing need for cloud-based applications and software, we expect Accenture’s investments in this space to propel long-term growth.
A Key Risk
Accenture's current ratio (a measure of liquidity) stood at 1.23 at the end of fourth-quarter fiscal 2022, lower than the current ratio of 1.27 recorded at the end of the prior quarter. The gradually decreasing current ratio does not bode well for Accenture as it implies that the risk of default is more.
Zacks Rank and Stocks to Consider
Accenture currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the broader Zacks Business Services sector are Booz Allen Hamilton Holding Corporation BAH and Cross Country Healthcare, Inc. CCRN.
Booz Allen carries a Zacks Rank #2 (Buy) at present. BAH has a long-term earnings growth expectation of 8.9%.
Booz Allen delivered a trailing four-quarter earnings surprise of 8.8%, on average.
Cross Country Healthcare is currently Zacks #2 Ranked. CCRN has a long-term earnings growth expectation of 6%.
CCRN delivered a trailing four-quarter earnings surprise of 10.1%, on average.
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