- Accenture plc expects profits to drop about 6% in fiscal 2023 due to the soaring US dollar since about 60% of the business operations are outside of the US.
- The Dublin-based consulting company has seen an increase in new business as outsourcing work surpasses consulting.
- Accenture reported earnings of $15.42 billion for the fourth quarter, which was a 15% increase year-over-year as demand for IT and cloud services remain strong.
Accenture plc recently reported earnings for the fourth quarter and fiscal year ending on August 31, 2022. The news got investors and analysts talking about the company’s performance during this turbulent time as the global fears of a potential recession rise. Even with that, though, there’s still demand for IT and cloud services, with businesses looking to grow their capabilities.
The Dublin-based consulting firm reported strong financials, but the stock still fell slightly as challenges are expected in 2023 with the rising US dollar impacting the bottom line.
We’re going to break down how Accenture makes money, where its revenue comes from, and what you need to know about the stock.
How does Accenture make money?
Accenture has 721,000 employees in over 120 countries working together to generate revenue.
Accenture reports its earnings under three different categories. They break the revenue streams down by geographic market, industry, and type of work. The three geographic markets include North America, Europe, and Growth Markets. The two types of work include consulting and outsource.
The industry groups include:
- Communications, Media & Technology
- Financial Services
- Health & Public Service
ACN earnings breakdown
For the fiscal year ending on August 31, 2022, Accenture had revenue of $61.6 billion, up 22% from the previous year, with a net income of $6.99 billion. Consulting brought in $34.1 billion while outsourcing revenue was at $27.5 billion. North America brought in $29.12 billion, while Europe brought in $20.26 billion, and growth markets brought in $12.21 billion in revenue.
Accenture reported a 15% year-over-year increase in revenue to $15.42 billion for the fourth quarter, only missing the analyst predictions by 0.2%. The consulting revenues were $8.33 billion, up 14% year-over-year. Outsourcing revenues were $7.09 billion, up 16% year-over-year for this quarter.
It’s also important to mention that when it comes to new bookings in the fourth quarter, consulting comprised 46% of the total while outsourcing accounted for 54%.
What’s happening with ACN stock?
With the entire stock market experiencing volatility due to soaring inflation and the Fed raising rates to combat it, the ACN has certainly been impacted. Since the recent earnings report came out around the same time as the rate hikes, it’s difficult to tell how much this macroeconomic news impacted this individual stock since the entire market reacted to the news.
ACN stock on October 11, 2022 is at $255.64, according to some analysts, the stock has a one-year target of $316.17.
The ACN stock slipped after the earnings report despite the results being almost on target. Many major firms with business outside of the US have warned that foreign exchange issues could lead to decreased profits. Management from Accenture estimated a 6% hit to its bottom line from the rising US dollar in 2023.
The company also forecasted that the revenue for the first quarter would be in the range of $15.20 billion to $15.75 billion, down from the $16.07 billion that was expected by analysts. The reason for the hit is that the company consolidated all of its earnings back into US dollars for financial reporting. In doing so, the earnings are slightly lower due to exchange rates.
Accenture announced a 15% dividend hike of $1.12 per share on September 22, so shareholders would get the payout on November 15. The dividend yield is currently at 1.7%, and the company has increased its dividend five times over the last five years.
ACN also repurchased 2.1 million shares for $605 million during the fourth quarter.
Accenture partnerships and acquisitions
We have to discuss some of the partnerships and acquisitions of Accenture that could help explain why the stock went up recently and could improve the bottom line in 2023 as the company looks to expand its services globally.
In the earnings report published on September 22, Accenture informed shareholders that they had agreed to acquire Inspirage, a consulting and IP firm that specializes in helping clients improve supply chains. The exact financials of this transaction were not disclosed at the time.
On October 4th, Accenture announced they were collaborating with Mars to work on the “Factory of the Future.” Mars is the global leader when it comes to confectionery, food, and pet care products and services. Mars and Accenture will use AI, cloud, edge technology, and digital twins to modernize global manufacturing operations. Since Accenture specializes in cloud, engineering, manufacturing, and supply chain operations, this “Factory of the Future” will leverage all of those areas of expertise. It was also mentioned that the companies would work on creating a new cloud platform to improve manufacturing applications with the use of AI. Only time will tell how this partnership works out as many are hopeful about what this factory will look like.
What’s next for ACN stock?
Analysts will be paying attention to how the surging US dollar impacts the bottom line for ACN. Management from Accenture clearly expect the consequences of the soaring US Dollar to be evident in the financial reports in 2023. It’s worth noting that about 60% of the company’s business comes from outside of America. This means that the increased value of the US dollar will hurt the company’s bottom line for the foreseeable future, until global currencies stabilize.
ACN has been working on improving its cloud offering through buyouts and partnerships. There’s no denying that there’s money to be made from cloud services and cybersecurity. It’s only a matter of ensuring business decisions pay off.
Microsft also named Accenture as their Global SI Partner of the Year a few months back. Accenture works with Microsoft to leverage the Azure cloud technology to offer industry-specific solutions for customized migration and modernization. With many companies worldwide looking to make a digital transformation, there’s going to be money to be made in this field.
The next earnings report is scheduled for December 16, 2022, when the company will share the financial results for the first quarter of 2023.
How Should You Be Investing?
There are many different companies to invest in around AI, cloud technology, and cybersecurity. There’s hope these industries can be resilient during times of high inflation since digital security will continue to be a priority. Many global firms are also looking to add cloud-based supply chain management software to speed up and improve processes.
It’s worth reminding you that the overall stock market is down due to soaring inflation and the Fed’s rate hikes to combat it. With that said, there are still ways for you to invest your money right now.
If you want to invest in tech without the hassle of sifting through hours of research and hype, Q.ai can help. With our Tech Rally Kit or Emerging Tech Kit, you can take advantage of data-based, AI-backed investment strategies.
As an investor, you want to know that you’re putting your money into companies that will rise in value. Accenture looks to be in a solid position as this global consulting company can help firms complete the digital transformation that’s needed for survival in the marketplace these days. We will be monitoring how the situation with the US dollar and inflation impacts them.
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