Accenture’s Outsourcing Business Drives Revenues As New Initiatives Help Margins
Accenture (NYSE:ACN) reported its Q1 FY 2013 results on Dec 19 and the company reported revenues in line with the guidance provided. Revenue rose 5% y-o-y to $7.2 billion, driven by double digit growth in the outsourcing business. The consulting business showed a slight decline and this led to an earnings per share of $1.06, which is a 10% increase on an annual basis. The consulting business had Q1 2013 revenues of $3.96 billion, implying a 3% decline annually while the outsourcing business revenues grew 9% to $3.26 billion. Accenture’s operating margin grew slightly to 14.5% compared to 13.9% at the same time last year, leading to an operating income of $1.05 billion and net income increased by 8% to $766 million.
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Outsourcing A Key Driver In Weak Macroeconomic Conditions
The outsourcing business has helped the company sustain the downturn in Europe and while the consulting business has shown a slight decline in the past year, the outsourcing business has shown consistent, double digit growth in the past year. The company expects this to be a primary driver for Q2. It also expects new business ventures in analytics, digital marketing and mobility to help grow the company in 2013.
The company guided that it expects revenues to range from $6.9 – $7.15 billion in Q2, 2013 and even raised the full year EPS on the bet that its new initiatives and outsourcing business will be successful. The company expects bookings for 2013 to be in the range of $31-$34 billion and EPS to fall between $4.24 – $4.32.
Margins Will Increase For 2013
We currently estimate that the EBITDA margins for the company lies between 16% to 18% depending on its divisions and this is likely to increase as the company diversifies into high margin businesses such as digital market, analytics and mobility services. This is evidenced by the fact that the company expects operating margins to fall in the 14.1%-14.2% range, a 20-30 basis point increase annually. The company plans to make strategic investments in digital marketing to improve the Accenture Interactive line of digital marketing services. We expect new initiatives to be a key margin driver for 2013 and beyond.
We currently have a $70 Trefis Price Estimate for Accenture which is in-line with its current market price.
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