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Why Accenture (ACN) Shares Are Down Today

Stocks in this article: ACN

NEW YORK (TheStreet) -- Accenture (ACN) was falling 7.6% to $76.64 Thursday after missing analysts' estimates for earnings and revenue for the fiscal second quarter.

For its fiscal second quarter Accenture posted earnings of $1.03 a share, missing the Capital IQ Consensus Estimate of $1.04 a share by 1 cent. Revenue rose 1% from the year-ago quarter to $7.13 billion. Analysts expected revenue of $7.21 billion for the quarter, Accenture expected revenue of between $6.95 billion and $7.25 billion for quarter.

Looking to the fiscal third quarter Accenture expects revenue of between $7.4 billion and $7.65 billion, compared to analysts' estimates of $7.55 billion.

Accenture also raised its forecast for full-year 2014. The company raised its EPS estimates to between $4.50 and $4.62 a share from between $4.44 and $4.56 a share. Analysts expect earnings of $4.51 a share for the year. The software company raised its FY4 revenue expectations to between 3% and 6% from between 4% and 6%. That would mean revenue of between about $29.28 and $30.13 billion for the year, compared to analysts' estimates of $29.74 billion.

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TheStreet Ratings team rates ACCENTURE PLC as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate ACCENTURE PLC (ACN) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, notable return on equity, good cash flow from operations and increase in stock price during the past year. We feel these strengths outweigh the fact that the company shows low profit margins."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 20.8%. Since the same quarter one year prior, revenues slightly increased by 1.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • ACN's debt-to-equity ratio is very low at 0.01 and is currently below that of the industry average, implying that there has been very successful management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.25, which illustrates the ability to avoid short-term cash problems.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. Compared to other companies in the IT Services industry and the overall market, ACCENTURE PLC's return on equity significantly exceeds that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly increased by 266.55% to $181.23 million when compared to the same quarter last year. In addition, ACCENTURE PLC has also vastly surpassed the industry average cash flow growth rate of 20.57%.
  • The net income growth from the same quarter one year ago has exceeded that of the IT Services industry average, but is less than that of the S&P 500. The net income increased by 7.6% when compared to the same quarter one year prior, going from $698.82 million to $751.85 million.
  • You can view the full analysis from the report here: ACN Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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