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Strong Cash Position Benefits Accenture Despite Rising Talent Costs
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Accenture plc (ACN - Free Report) stock has gained 18.7% over the past six months, underperforming the rally of the industry by a slight margin while outperforming 9.9% growth of the Zacks S&P 500 composite.
Six Months Price Performance
Image Source: Zacks Investment Research
ACN reported better-than-expected first-quarter fiscal 2025 results. Earnings (excluding 13 cents from non-recurring items) of $3.6 per share outpaced the Zacks Consensus Estimate by 6.2% and increased 28.7% from the year-ago quarter. Total revenues of $17.7 billion beat the consensus estimate by 3.1% and gained 9.1% year over year.
How is Accenture Performing?
The company has a disciplined acquisition strategy aimed at channeling its business in high-growth areas, adding skills and capabilities, and deepening industry and functional expertise. It spent $6.6 billion across 46 acquisitions in fiscal 2024.
The recent acquisition of the Award Solutions to improve Accenture LearnVantage’s training modules helped it meet the unique requirements of network leaders, network operations, performance engineers and IT professionals in the telecom space. The recent buyout of Allitix strengthens ACN’s connected planning capabilities using Anaplan and improves its ability to assist clients in standardizing planning practices across business functions for increased agility, data-driven decision-making and productivity.
ACN continues to witness strong demand for application modernization and maintenance, cloud enablement and cybersecurity-as-a-service. Its clients focus on improving productivity and saving operational costs by using data and analytics, AI and automation to transform their operations. These trends are boosting Accenture’s managed services business across the globe.
Accenture had a cash and cash equivalent balance of $8.3 billion at the end of first-quarter fiscal 2024 against a total long-term debt of just $5 million. Cash provided by operating activities was $1 billion and the free cash flow was $870 million. Accenture generates significant cash from operations and holds a sufficient cash balance that serves management with flexibility to pursue growth in areas that exude potential. This flexibility, coupled with technological prowess, enables it to grab opportunities in different markets.
The company has a consistent track of dividend payments. In fiscal 2021, 2022, 2023 and 2024, it paid out $2.2 billion, $2.5 billion, $2.8 billion and $3.2 billion in dividends, respectively. Such actions indicate its commitment to returning value to shareholders and underline its business confidence. We anticipate steady income growth resulting in consistent cash flow, supporting the company in paying out stable dividends.
ACN’s current ratio (a measure of liquidity) stood at 1.47 at the end of first-quarter fiscal 2024, lower than the industry average of 1.16. However, the current ratio is higher than the preceding quarter's 1.1 and the year-ago quarter's 1.33. A current ratio of more than 1 indicates that the company might be able to pay off short-term obligations efficiently.
Risks Faced by ACN
Accenture operates in a highly competitive talent market, which results in higher talent costs that hike its total expenses. The industry is labor-intensive and dependent on foreign talent. Although advancements in automation and AI offer massive opportunities to the industry, these technologies enable clients to comprehend and integrate new methods to enhance performance, thereby creating hindrances for consulting services firms.
ACN’s market share and top line depend on client relationships and the number of contracts it secures. This, along with product differentiation’s limited scope, makes renegotiating large contracts crucial. The company deals with the constant pressure of competition from Genpact Limited, Cognizant Technology Solutions and Infosys. Competition is fierce in Europe since all the major players are fighting for business. This results in increasing pricing pressure.
ACN’s Zacks Rank & Stocks to Consider
Accenture carries a Zacks Rank #3 (Hold) at present.
AppLovin has a long-term earnings growth expectation of 20%. APP delivered a trailing four-quarter earnings surprise of 26.2%, on average.
Climb Global Solutions has a long-term earnings growth expectation of 16%. CLMB delivered a trailing four-quarter earnings surprise of 51.1%, on average.
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Strong Cash Position Benefits Accenture Despite Rising Talent Costs
Accenture plc (ACN - Free Report) stock has gained 18.7% over the past six months, underperforming the rally of the industry by a slight margin while outperforming 9.9% growth of the Zacks S&P 500 composite.
Six Months Price Performance
ACN reported better-than-expected first-quarter fiscal 2025 results. Earnings (excluding 13 cents from non-recurring items) of $3.6 per share outpaced the Zacks Consensus Estimate by 6.2% and increased 28.7% from the year-ago quarter. Total revenues of $17.7 billion beat the consensus estimate by 3.1% and gained 9.1% year over year.
How is Accenture Performing?
The company has a disciplined acquisition strategy aimed at channeling its business in high-growth areas, adding skills and capabilities, and deepening industry and functional expertise. It spent $6.6 billion across 46 acquisitions in fiscal 2024.
The recent acquisition of the Award Solutions to improve Accenture LearnVantage’s training modules helped it meet the unique requirements of network leaders, network operations, performance engineers and IT professionals in the telecom space. The recent buyout of Allitix strengthens ACN’s connected planning capabilities using Anaplan and improves its ability to assist clients in standardizing planning practices across business functions for increased agility, data-driven decision-making and productivity.
ACN continues to witness strong demand for application modernization and maintenance, cloud enablement and cybersecurity-as-a-service. Its clients focus on improving productivity and saving operational costs by using data and analytics, AI and automation to transform their operations. These trends are boosting Accenture’s managed services business across the globe.
Accenture had a cash and cash equivalent balance of $8.3 billion at the end of first-quarter fiscal 2024 against a total long-term debt of just $5 million. Cash provided by operating activities was $1 billion and the free cash flow was $870 million. Accenture generates significant cash from operations and holds a sufficient cash balance that serves management with flexibility to pursue growth in areas that exude potential. This flexibility, coupled with technological prowess, enables it to grab opportunities in different markets.
The company has a consistent track of dividend payments. In fiscal 2021, 2022, 2023 and 2024, it paid out $2.2 billion, $2.5 billion, $2.8 billion and $3.2 billion in dividends, respectively. Such actions indicate its commitment to returning value to shareholders and underline its business confidence. We anticipate steady income growth resulting in consistent cash flow, supporting the company in paying out stable dividends.
ACN’s current ratio (a measure of liquidity) stood at 1.47 at the end of first-quarter fiscal 2024, lower than the industry average of 1.16. However, the current ratio is higher than the preceding quarter's 1.1 and the year-ago quarter's 1.33. A current ratio of more than 1 indicates that the company might be able to pay off short-term obligations efficiently.
Risks Faced by ACN
Accenture operates in a highly competitive talent market, which results in higher talent costs that hike its total expenses. The industry is labor-intensive and dependent on foreign talent. Although advancements in automation and AI offer massive opportunities to the industry, these technologies enable clients to comprehend and integrate new methods to enhance performance, thereby creating hindrances for consulting services firms.
ACN’s market share and top line depend on client relationships and the number of contracts it secures. This, along with product differentiation’s limited scope, makes renegotiating large contracts crucial. The company deals with the constant pressure of competition from Genpact Limited, Cognizant Technology Solutions and Infosys. Competition is fierce in Europe since all the major players are fighting for business. This results in increasing pricing pressure.
ACN’s Zacks Rank & Stocks to Consider
Accenture carries a Zacks Rank #3 (Hold) at present.
Some better-ranked stocks are AppLovin (APP - Free Report) and Climb Global Solutions, Inc. (CLMB - Free Report) , flaunting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
AppLovin has a long-term earnings growth expectation of 20%. APP delivered a trailing four-quarter earnings surprise of 26.2%, on average.
Climb Global Solutions has a long-term earnings growth expectation of 16%. CLMB delivered a trailing four-quarter earnings surprise of 51.1%, on average.