To The Moon

$Accenture PLC(ACN)$ is scheduled to release first-quarter fiscal 2025 results on 19 Dec before market open.

Consensus estimate for the bottom line have been expected for quarterly earnings of $3.38 per share in its forthcoming report, representing an increase of 3.4% year over year. Revenues are projected to reach $17.18 billion, increasing 5.9% from the same quarter last year.

Accenture business optimization strategy to lower structural costs is anticipated to have driven the bottom line.

Accenture's Revenue Streams

Accenture's revenue streams consist of: Outsourcing revenues: Income generated from services and capabilities offered to manage and transform clients' systems and the running of business functions; Consulting revenues: Income from technology, management consulting, and systems integration services.

Accenture offers a range of value propositions for its customers:

• Business Transformation: Accenture assists clients in transforming their businesses through digital innovation, technology, and strategy.

• Industry Expertise: The company provides specialized industry knowledge to help clients navigate challenges and seize opportunities.

• Global Reach: Accenture’s global presence allows it to serve clients in various regions, offering local expertise and resources.

• Innovation and Technology: Accenture leverages cutting-edge technology and innovation to drive client success and stay ahead of industry trends.

• Sustainability and Responsibility: The company focuses on sustainable and responsible business practices, aligning with client and societal values.

• Talent and Expertise: Accenture’s diverse workforce of skilled professionals delivers valuable insights and solutions.

Pulse of Change Index includes indicators on technology, talent, the economy, geopolitical issues, climate, and consumer and social issues. The index shows that C-suite leaders are most concerned about adapting to the pace of tech innovation, particularly AI.

How does these value propositions sit with Accenture key metrics to look at for this earnings.

Accenture's Geographic Revenue

The area that geographic revenue would come from North America, Growth Markets, and Europe.

The North America region revenue is estimated to reach $8.05 billion. The estimate suggests a change of +6.4% year over year.

For the Growth Markets, the revenue is projected to reach $2.88 billion. The estimate indicates a year-over-year change of +0.8%.

For the Europe or EMEA region, the revenue is expected to come in at $6.31 billion. The estimate points to a change of +8.7% from the year-ago quarter.

It is pretty clear that North America and EMEA would be key revenue contributor, hence, the business optimization strategy to lower structural costs would be key to drive their bottom line higher.

Accenture Revenue by Industry Group

Accenture revenue mostly come from these industry sector, Communications, Media & Technology, Financial services, Product, and Health & Public Service.

For the Product group, revenue is expected to come in at $5.07 billion. The estimate indicates a change of +4.3% from the prior-year quarter.

Health & Public Service group is expected to bring in $3.54 billion. The estimate indicates a change of +4.9% from the prior-year quarter.

Under the Financial Services group, revenue is estimated to reach $3.11 billion. The estimate suggests a change of +2.5% year over year. Communications, Media & Technology group is estimated to reach $2.79 billion. The estimate indicates a year-over-year change of +4.6%.

This should make up higher revenue overall for 2024.

Accenture New bookings

In the fourth quarter of fiscal 2024, Accenture's new bookings were $20.1 billion, which is a 21% increase in U.S. dollars and 24% in local currency from the previous year.

We are looking at first quarter of fiscal 2025 total New Bookings to come in at $19.31 billion. This is higher than the $18.45 billion in the same quarter of the previous year.

For Managed Services New Bookings, it is anticipated to come in at $9.90 billion. This is also higher than the $9.83 billion in the same quarter of the previous year.

For the Consulting New Bookings, we are looking at $9.41 billion which is significant higher than $8.62 billion in the same quarter last year.

Revenue by Type Of Work: Consulting and Managed Services

Based on the revenue coming from Consulting work, we are expecting it to reach $8.81 billion, this is a +4.1% increase from same quarter one year ago.

Revenue from Managed Services also expected to come in at a 7.3% increase to $8.33 billion, compared to same period one year ago.

Accenture (ACN) Cash balance Make It To Capture Opportunities Better

As of 31 August 2024, Accenture's cash balance was $5.0 billion. While it is always sensible to look at a company's total liabilities, it is very reassuring that Accenture has US$3.99b in net cash. The cherry on top was that in converted 90% of that EBIT to free cash flow, bringing in US$8.6b.

I think the risk of Accenture use of debt would be less risky.

Accenture (ACN) Use Of Debt Less Risky

Accenture has a total shareholder equity of $29.2B and total debt of $1.0B, which brings its debt-to-equity ratio to 3.5%. Its total assets and total liabilities are $55.9B and $26.8B respectively. Accenture's EBIT is $10.0B making its interest coverage ratio -46.7. It has cash and short-term investments of $5.0B.

ACN's short term assets ($20.9B) exceed its short term liabilities ($19.0B) for the Short Term Liabilities.

ACN's short term assets ($20.9B) exceed its long term liabilities ($7.8B) for the Long Term Liabilities.

With the cash balance and free cash flow, this make the use of debt less risky.

Accenture Earnings Grown By 8.9% Over Last 5 Years

Looking at the earnings trend, we are seeing ACN's earnings grown by 8.9% per year over the past 5 years.

Though ACN's earnings growth over the past year (5.7%) is below its 5-year average (8.9% per year), it is still experiencing accelerating growth.

ACN earnings growth over the past year (5.7%) exceeded the IT industry -4%. This mean that ACN has performed better than the industry.

Technical Analysis - MACD and Multi-timeframe (MTF)

If we looked at how ACN has only gained 0.07% on 17 Dec (Tuesday) trading, this could mean that market is still waiting for Fed decision on Wednesday to see the future decision on the rate cut or even rate hike.

From the trading, ACN is trading near the short-term MA and MACD is trying to make a bullish crossover, but I think it did not manage to do it, but we will have to see if there is an improved investors sentiment on Wednesday (18 Dec).

MTF is giving upward trend for longer period but no clear signal of a strong upward trend for ACN.

Summary

I would think there might be some impact for software and consulting firms like ACN when Fed announced the December decision on interest rates, this is because most of these consulting firms does have some form of debts, but ACN is using debts have lower risk as they have a strong cash flow.

Consulting firms normally collect the payment for new bookings much later.

So we will need to monitor closely whether there is any impact on the broader consulting sector or just some struggling one.

Appreciate if you could share your thoughts in the comment section whether you think ACN should be able to provide an earnings surprise if Fed indicate more rate cuts next year (2025).

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.