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From the Survey: Accenture PLC
Accenture PLC (ACN) is an Ireland-incorporated company that offers management consulting, technology outsourcing, and business process outsourcing (BPO) services throughout more than 200 cities in 54 countries. Accenture, which was formerly a part of Andersen Worldwide and Arthur Andersen LLP, separated from the company on December 19, 2000, and became Accenture LTD. The company, which was renamed to Accenture PLC, had 249,000 employees (as of May 31, 2012). Its workforce fluctuates considerably on a year-to-year basis, following the current and projected demand for its services, which is largely connected to business spending (discussed below).
Accenture offers consulting (56% of net revenues for the fiscal year ended August 31, 2012) and outsourcing services (44%) to clients within five operating groups: Products (24% of 2012 net revenues); Communications, Media & Technology (21%); Financial Services (21%); Chemicals (19%); and Health & Public Service (15%). In total, these segments encompass 19 industry groups. Specifically, Accenture’s consulting and outsourcing growth platforms include developing, designing, and executing changes to a client’s business and operating models (management consulting), or providing expertise in the realm of technology through three types of work: systems integration consulting, technology consulting, and information technology (IT) outsourcing. Lastly, Accenture provides services, such as managing business processes and functions, which help to deliver operational efficiency, reduce costs, and improve performance levels (business processing outsourcing). Furthermore, these services are offered on a worldwide scale through its Global Delivery Network in the Americas, Europe, the Middle East, and Africa (EMEA), and Asia Pacific regions.
For the Shareholders
Accenture has aggressively repurchased stock for a number of years. During fiscal 2012, the company generated $3.9 billion in free cash flow, resulting in cash and short-term investments of approximately $9 billion. As a result of this favorable cash position, the company bought back 36.6 million shares in fiscal 2012 for an aggregate $2.1 billion, at an average price of $57.32 a share. In fact, the share count at the end of fiscal 2011 had declined north of 30% from 2002. (Note: Accenture released its fourth-quarter and fiscal 2012 press release; however, the company had not provided the 10-K during the writing of this article.) ACN still has $4.2 billion left on the share repurchase authority, which should continue to bolster stockholder value and drive share earnings. As a result, we have seen year-over-year share-net increases, despite the recession, since 2002.
Accenture has maintained and raised its dividend since 2006, which is now paid semi-annually. During fiscal 2012, it paid $1.485 per share, a 32% increase over 2011’s tally. The board of directors will likely approve additional increases going forward. All told, Accenture spent over $3 billion through share buybacks and cash dividends in fiscal 2012.
Accenture has produced better-than-anticipated results in fiscal 2012, despite the overall economic malaise, particularly in Europe. In fact, the information technology services provider has recorded decent market-share gains of late due to restructuring efforts implemented by numerous companies. Specifically, Accenture has seen demand pick up and its client base expand, largely because its services typically allow clients to cut costs, increase efficiency, and globalize operations. And, although this may cost a hefty sum initially, the benefits over the long haul usually make the spending worthwhile. This is evident, as new bookings hit peak levels during the year, at $32.2 billion, despite foreign exchange headwinds. What’s more, the company posted record earnings of $3.84 a share, on revenues of $29.8 billion.
Although these positive trends are anticipated to continue at a more moderate pace, substantial top- and bottom-line growth is in the cards for this company going forward. Accenture’s consulting business is expected to slow somewhat in fiscal 2013 due to the soft economic environment; however, opportunities in outsourcing may offset any losses due to increasing demand for these services. Additionally, international expansion remains a primary focus. Management specified that business in China, South Africa, Brazil, and India should help support overall growth over the short- and long-term.
Adding It All Up
Shares of Accenture have been rising, albeit gradually, for some time now. Investors have responded favorably to the company’s fiscal 2012 showing, pushing the price to another all-time high. Overall, the company’s standout performances, strong bookings, decent dividend yield, and appealing short- and long-term opportunities should pave the way for additional share price increases along the way.
For a more detailed evaluation of Accenture’s business prospects and the investment merits of the stock, subscribers are encouraged to check our full page report in The Value Line Investment Survey.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.