Accenture's Recent Bookings Should Reflect In Q4 Report

Accenture Plc ACN will report its fourth quarter results on Thrusday and Citi expects earnings in line with consensus view.

Analyst Ashwin Shirvaikar projects fourth quarter EPS of $1.30 (down from $1.32 previously) and revenue of $8.51 billion, in-line with consensus.

Shirvaikar noted that Accenture's results would benefit from its recent bookings, continued consulting strength, recent acquisitions and easier FX. However, the near-term stock movement would be based on initial FY 2017 outlook and its first quarter revenue outlook.

According to the analyst, the stock would fall if the company guides FY17 revenue to grow 3-6 percent, while growth better than 8 percent at the upper end is likely to lift shares.

However, the analyst pointed out that the company's first quarter outlook should be stronger than expected, contrary to investor expectations, due to the timing of some of ACN's larger M&A deals.

"While most peers have reported weakness in verticals like banking, we do not expect ACN commentary to materially deteriorate. Having said this, ACN's caution could manifest itself in a wider-than-normal constant currency outlook (say, 4%-8%, rather than the normal 300bps spread)," Shirvaikar wrote in a note.

The analyst maintained his Neutral rating on the stock, but marginally raised the price target by $0.50 to $116.

"We believe ACN's 10-30 bps margin improvement and capital return policy should continue, leading to ~10% EPS growth," the analyst added.

But, the analyst cautioned that the company might face growth challenges in its second quarter on tougher comps.

In addition, Shirvaikar modestly cut his FY16 EPS view by $0.01 to $5.33, FY17 forecast by $0.03 to $5.87, while raising FY18 EPS estimate by $0.01 to $6.41.