Baird Says Accenture Getting More Interesting As Stock Nears $110

Accenture Plc ACN has announced its intent to acquire OCTO Technology OCTOF. Accenture seems to be “more interesting as the stock nears ~$110,” Baird’s David J. Koning said in a report. He maintained a Neutral rating on the company, with a price target of $125.

Accenture has been making acquisitions and is likely to make additional ones that would contribute to its F2017 revenue, analyst Koning commented.

OCTO Technology

Accenture has agreed to purchase 47.4 percent of OCTO, expressing an intention to acquire the remaining shares. Accenture would need to pay EUR 115 million or ~$129 million to purchase 100 percent of OCTO, which specializes in digital transformation and software development.

OCTO is to join Accenture Digital following its acquisition. “Using OCTO's Factset 2017E analyst estimates for revenue (~$63 million), 2015 EBIT margin of 9.9% (~$6.2 million), and assuming 100% of the company is purchased, the acquisition could have ~0.2% positive impact on revenue and <$0.01 impact on EPS,” Koning wrote.

Other Acquisitions

Accenture has guided to full-year spending of ~$900-$1,000 million for acquisitions in F2016. The company’s guidance for the year also includes the expectation for ~2 percent revenue contribution from acquisitions, the analyst mentioned.

“Based on recent acquisitions/divestitures (including the Duck Creek divestiture) current F2017 revenue impact could be +0.9%. Ultimately, we expect ACN to make more acquisitions, which we expect to add ~1-2% to total company revenue growth in F2017,” the Baird report stated.

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