Updated from 4:24 p.m. ESTAccenture ( ACN) posted first-quarter results Thursday that beat top- and bottom-line estimates, thanks in part to a sizable share repurchase during the period. Accenture also indicated second-quarter sales could come in slightly lighter than currently expected, but left full-year sales targets unchanged and raised earnings guidance to reflect the share repurchase. Highlighting higher-than-expected bookings during the quarter, company executives struck a bullish tone about the future prospects of the information-technology service provider. "The global demand for consulting and outsourcing is strong," CEO William D. Green said in a postclose conference call. He noted "improving market conditions in terms of demand and pricing." And, he added, "We are feeling more optimistic about pricing than we have for a very, very long time." Executives pointed out more activity in technology spending, "refreshment" of business applications and success competing against Indian off-shore outsourcing companies. Accenture said net income rose to $214.9 million, or 36 cents a share, from $196.3 million, or 32 cents a share -- and 30 cents a share on an options-adjusted basis -- a year earlier. Net revenue grew 12% from a year ago to $4.17 billion in the first quarter, which ended Nov. 30. The EPS figure beat the consensus estimate of 34 cents gathered by Thomson First Call; revenue results also exceeded analysts' average expectations of $4.1 billion. Accenture had forecast net revenue of $4 billion to $4.2 billion and earnings of 32 cents to 34 cents a share under generally accepted accounting principles. But the company's guidance did not account for 46.4 million shares that Accenture subsequently repurchased at a discount in a Dutch tender offer. Altogether, Accenture purchased 52.2 million shares at a cost of $1.15 million during the quarter, which contributed to a penny of upside to earnings per share.
Accenture reported $5.54 billion in total new bookings in the first quarter, the highest in seven quarters and notably higher than the $4.1 billion to $4.6 billion expected by analysts. The company reiterated fiscal 2006 bookings targets of $19 billion to $21 billion, although Green said, "You have to be pretty optimistic about the bookings going forward." Accenture said it expects second-quarter net revenue of $4 billion to $4.15 billion and earnings of 33 cents to 35 cents a share, including stock options. Analysts were expecting earnings of 35 cents a share excluding stock options and 33 cents a share including options on $4.16 billion in revenue. On the conference call, Accenture noted that the second quarter is a seasonally weak period. Accenture reiterated its previous fiscal year 2006 targets for revenue growth of 9% to 12% in local currency. To reflect a benefit of 7 cents a share from the repurchase and redemption of 46.4 million shares in the first quarter, Accenture raised full-year earnings guidance to $1.52 to $1.57 a share from a prior range of $1.45 to $1.50 a share. Analysts most recently pegged full-year earnings at $1.52 a share excluding stock charges and $1.49 a share including stock expenses on sales of $17.1 billion, which represents annual sales growth of nearly 10%. Accenture's consulting net revenue was $2.58 billion in the first quarter, an increase of 8% in U.S. dollars and 9% in local currency from a year earlier. Outsourcing generated $1.59 billion of net revenue, an increase of 18% in both U.S. dollars and local currency from the same period last year. Consulting bookings increased 41% year over year to $2.78 billion and outsourcing bookings rose 34% to $2.76 billion. COO Stephen Rohleder said the numbers provide evidence of the company's business process outsourcing and applications outsourcing taking hold. The company's BPO revenue rose 25% during the quarter.
Accenture also was bullish about its forays in off-shoring, citing a win against Indian outsourcing leaders Infosys ( INFY), Wipro ( WIT) and Tata Consulting Services. Concerns about off-shoring cannibalizing other business and eating away margins have weighed on IT services firms such as Accenture. But Accenture and some analysts argue that outsourcing work to India extends the company's business in areas that it would not have sought otherwise. Accenture ended the quarter with 16,500 employees in India, up from about 16,000 at the end of the previous quarter and out of a total workforce of 126,500. Accenture reported a 12.3% first-quarter GAAP operating margin, up from 11.4% on an options-adjusted basis a year ago. The company's gross margin was 31.7%, compared with 32.6% a year ago on a GAAP basis and 31.8% on an options-adjusted basis. Shares of Accenture recently climbed 87 cents, or 2.9%, to $30.55 in after-hours trading after closing up 22 cents, or 0.8%, at $29.68.