Pacific Growth keeps its equal-weight rating on Accenture (ACN ).
Analyst Natalie Walrond says as expected, the consulting firm's first-quarter revenues and earnings per share were strong, but margins, and free cash flow were somewhat disappointing. She says 34.1% of the first-quarter gross margin was light, due to a continued shift in the company's business mix toward outsourcing, ongoing pricing pressures, and lower-than-expected margins on three contracts within the company's Communications and High Technology operating group.
Walrond notes the $79 million first-quarter free cash flow was light, vs. her $403 million estimate. She's putting her model under review. Also, she notes second-quarter guidance was raised for revenues, while earnings were in line with her estimates, which suggests, in her view, continuing margin and pricing pressures.