Why You Should Hold on to Accenture (ACN) Stock for Now
Accenture plc ACN has an impressive Growth Score of B. This style score condenses all the essential metrics from the company’s financial statements to get a true sense of the quality and sustainability of its growth.
The company has an expected long-term earnings per share (three to five years) growth rate of 9.5%. Earnings are expected to increase 6.8% year over year in fiscal 2023 and 9% in fiscal 2024.
What’s Driving the Stock
Acquisitions have been one of Accenture’s key growth strategies. These have enabled the company to enter new markets, diversify and broaden its product portfolio, and maintain its leading position.
The recent acquisition of SKS Group is expected to enhance Accenture’s technology, consulting and regulatory services capabilities, positioning the company better to serve banks that offer financial and development assistance to local businesses in Switzerland, Germany and Austria. Another recent acquisition, Morphus, is expected to expand Accenture’s cybersecurity foothold in Latin America.
The company has been steadily gaining traction in its consulting as well as outsourcing businesses, backed by high demand for services that can improve operating efficiencies and save costs.
On the consulting front, the company experiences strong demand for digital, cloud- and security-related services, and assistance in the adoption of new technologies. Consulting revenues of $8.4 billion increased 1% year over year on a reported basis and 10% in terms of local currency in the first quarter of fiscal 2023.
On the outsourcing (Managed Services) front, Accenture continues to see strong demand for its assistance of clients with the operation and maintenance of digital-related services and cloud enablement. Managed Services revenues of $7.3 billion increased 11% year over year on a reported basis and 20% in terms of local currency.
Accenture PLC Revenue (TTM)
Accenture PLC revenue-ttm | Accenture PLC Quote
Higher talent costs are hurting consulting services providers like Accenture. The consulting industry is labor-intensive and heavily dependent on foreign talent.
Moreover, while frequent acquisitions improve revenue opportunities, business mix and profitability, they add to integration risks. Also, they are a distraction for management, which could impact organic growth.
Zacks Rank and Stocks to Consider
Accenture currently carries a Zacks Rank #3 (Hold).
Investors interested in the Zacks Business Services sector can consider better-ranked stocks like Omnicom Group OMC and ICF International ICFI.
The Zacks Consensus Estimate for OMC’s first-quarter 2023 earnings is pegged at $1.39, which has been revised downward by 2.1% in the past 60 days. The consensus estimate for the full year is $7.15 per share. This has been revised 13.7% upward in the past 60 days.
For first-quarter 2023, earnings are expected to match the year-ago reported figure. Earnings are expected to grow 3.2% on a year-over-year basis in 2023. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
For first-quarter 2023, ICFI’s earnings are expected to register 7.6% growth on a year-over-year basis. For 2023, the company’s earnings are expected to grow 9.2% on a year-over-year basis.
The Zacks Consensus Estimate for the company’s first-quarter 2023 earnings is pegged at $1.41, which has been revised upward by 6% in the past 60 days. The consensus estimate for the full year is $6.3 per share. This has been revised 7.3% upward in the past 60 days. The company currently carries a Zacks Rank #2 (Buy).
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