How Will Accenture (ACN) Stock React Today To This Analyst Downgrade?

NEW YORK (TheStreet) -- Shares of Accenture PLC (ACN) are down 0.69% to $80.04 in pre-market trading after the business consulting group's rating was cut to "neutral" from "buy" at Citigroup (C)  this morning.

Analysts at the firm cited relative valuation and limited upside potential to its fiscal year 2015 expectations for the downgrade.

Earlier this morning, Accenture released a report that said the Industrial Internet of Things gives an opportunity for growth of digital services.

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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, increase in stock price during the past year, increase in net income and growth in earnings per share. 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 12.3%. Since the same quarter one year prior, revenues slightly increased by 6.9%. 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 0.00 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 1.26, which illustrates the ability to avoid short-term cash problems.
  • The stock price has risen over the past year, but, despite its earnings growth and some other positive factors, it has underperformed the S&P 500 so far. 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.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500, but is less than that of the IT Services industry average. The net income increased by 0.9% when compared to the same quarter one year prior, going from $810.26 million to $817.34 million.
  • ACCENTURE PLC's earnings per share improvement from the most recent quarter was slightly positive. The company has demonstrated a pattern of positive earnings per share growth over the past two years. However, we anticipate underperformance relative to this pattern 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).
  • You can view the full analysis from the report here: ACN Ratings Report

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