Accenture Falls as Longer Consulting Projects Crimp Revenue
Accenture Plc (ACN), the world’s second- largest technology-consulting company, fell the most in more than a month on a decline in first-quarter sales of its advice.
Revenue from consulting, the company’s biggest unit, fell 3 percent from a year earlier to $3.96 billion, declining for the third straight quarter. Total sales climbed 2.1 percent to $7.22 billion, compared with the $7.3 billion average estimate of 19 analysts polled by Bloomberg.
Clients of Accenture are choosing contracts over longer periods that don’t produce revenue as quickly, Chief Financial Officer Pamela Craig said yesterday on a conference call. She said the pattern will continue into the second quarter, with customers awaiting signs of Europe’s emergence from its credit crisis, before revenue recovers in the second half of the year.
“The root cause of the revenue weakness is clients showing a slow spending pace on small and mid-sized consulting deals,” said Rod Bourgeois, an analyst at Sanford C. Bernstein & Co. in New York, in an e-mail. “Large-scale consulting deals -- where Accenture is especially distinctive -- are experiencing healthy demand.” He has the equivalent of a buy rating on the shares.
Accenture, incorporated in Dublin, fell 2 percent to $69.02 at the close in New York, the biggest decline since Nov. 7. The shares have risen 30 percent this year.
Sales in the fiscal second quarter will be $6.9 billion to $7.15 billion, Accenture said, compared with the $7.14 billion average estimate of analysts. Growth rates in outsourcing will be higher than in consulting, which will be little changed in the first half and then begin to show gains compared with 2012, Craig said.
Net income for the first quarter, which ended Nov. 30, rose to $698.8 million, or $1.06 a share, from $642.1 million, or 96 cents a share, a year earlier, the company said yesterday in a statement. Analysts predicted $1.05 a share.
Accenture boosted its forecast for 2013 earnings to a range of $4.24 to $4.32 a share, compared with the $4.27 average estimate of analysts. Accenture is able to make the forecast with certainty because of contracts it already knows it will be able to record, Chief Executive Officer Pierre Nanterme said.
After a slowdown in revenue, “the fact that we are contracting on longer-term consulting will make all the final business more resilient with more visibility over time,” he said.
Outsourcing sales rose 9 percent to $3.26 billion as more customers hired Accenture to cut costs by shifting work overseas.
A lower tax rate helped boost profits, said Jamie Friedman, an analyst at Susquehanna International Group in New York. Investors were surprised that Accenture booked negative cash flow, the result of a $500 million pension contribution, he said.
“It’s rare to see negative cash flow from Accenture,” said Friedman, who has the equivalent of a buy rating on the shares, in an e-mail.
The company trails only International Business Machines Corp. in technology-consulting sales. IBM, based in Armonk, New York, is scheduled to report quarterly earnings next month for the period ending in December.
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