Accenture: your growth consultant


  Recent Price
  P/E Ratio
  Shares (millions)
  Long-Term Debt as % of Capital
  52-Week Price Range
$42.32 - $31.91

Accenture ($38; NYSE: ACN) has delivered solid growth, with per-share profits up 34% on a 20% sales gain for the 12 months ended May. Consensus sales and profit estimates for the fiscal year ending August 2009 have trended upward over the last three months and now project double-digit growth. The consulting business is booming as clients seek help in dealing with the weak economy. The rush to downsize, lay off workers, and cut costs has created new business for Accenture.

Strong operating performance in perilous times rarely goes unnoticed. Accenture shares have risen 6% so far in 2008, versus a 19% decline in the S&P 1500 Information Technology Sector Index and a 16% fall for the broader S&P 1500 Index. Despite Accenture’s outperformance, the shares seem reasonably valued and remain well-positioned for gains over the next 12 months. Accenture is a Focus List Buy and a Long-Term Buy.

Consulting and outsourcing
Accenture operates about 150 offices in 49 countries. Slightly less than half (48%) of revenue comes from Europe, the Middle East, and Africa, with the Americas (43%) and Asia (9%) accounting for the rest.

Consulting contracts (60% of fiscal 2007 revenue) typically last between a year and 18 months and focus on improving business strategies, cutting costs, or upgrading technology. By concentrating on projects that make a direct contribution to the bottom line, Accenture can book new business during periods when customers are trying to reduce expenses. In 2001 and 2002, many customers cut other consultants but maintained Accenture, allowing the company to take market share from weaker rivals. The remaining 40% of Accenture’s revenue comes from outsourcing business processes and other services, another line of business that directly helps clients fatten the bottom line.

Accenture focuses on five operating groups, with products and services customized for different markets. Communications and high technology (23% of fiscal 2007 revenue) serves media and communications companies. Products (25%) serves a diverse group of markets ranging from automobiles to health care to retail. Resources (16%) serves commodity-based industries, and the target markets for financial services (22%) and government (13%) are self-explanatory. This diverse business mix allows Accenture to tap into numerous growth niches without getting sidetracked by weakness in any single end market.

Conservative outlook
Wall Street has become skeptical that Accenture can sustain its growth, partly because some rivals expect slowdowns. But in June, Accenture lifted its expectations for the August quarter and projected revenue growth of 9% to 12% for the year ending August 2009. The company said bookings are healthy, with few delays or cancellations. Earlier this month, Accenture signed a 10-year, $550 million outsourcing deal with Bristol-Myers Squibb ($22; NYSE: BMY).

The consensus now projects 10% growth in per-share profits for fiscal 2009, a target Accenture may be able to exceed. At 13 times the 2009 estimate, Accenture trades well below its five-year average forward P/E ratio of more than 23. August-quarter results are due Sept. 25. An annual report for Accenture Ltd. is available from 22 Victoria St., Hamilton HM 12, Bermuda;
(441) 296-8262;

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