Why Accenture (ACN) Stock Is Down Today

NEW YORK (TheStreet) -- Shares of Accenture  (ACN) are down -1.47% to $81.84 in mid-afternoon trading on Thursday after the company cut its 2014 full-year earnings expectations as a result of margins coming under pressure, Reuters reports.

The consulting and outsourcing services provider said it expects earnings in the range of $4.50 to $4.54 a share, compared to its previous guidance of $4.50 to $4.62 a share.

Accenture expects full-year operating margins to be at the low end of its previous 14.3% to 14.5% forecast.

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However, the company reported third-quarter diluted earnings per share of $1.26, compared to $1.21 from the 2013 third quarter. 

Revenue for the most recent quarter increased 7% over the previous year to $7.74 billion.

Separately, 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 and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

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

  • The revenue growth came in higher than the industry average of 16.6%. Since the same quarter one year prior, revenues slightly increased by 1.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in 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 1.24, which illustrates the ability to avoid short-term cash problems.
  • In its most recent trading session, ACN has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • ACCENTURE PLC's earnings per share declined by 37.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, ACCENTURE PLC increased its bottom line by earning $4.93 versus $3.84 in the prior year. For the next year, the market is expecting a contraction of 8.1% in earnings ($4.53 versus $4.93).
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to other companies in the IT Services industry and the overall market on the basis of return on equity, ACCENTURE PLC has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
  • 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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