Accenture - Standing Upright Even In This Global Economy Scenario
Shikhaa is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
The 12 year old step son of the accounting firm Arthur Andersen, Arthur Consulting which changed its name to Accenture (NYSE: ACN) meaning “Accent on the future” is now one of the largest multinational management consulting, technology services and outsourcing companies. It is considered to be the back bone for many companies enabling them to perform with best results and thereby acting as a barometer of the overall economy.
The Accent, which generates revenue out of consulting, although faced a decline in its first quarter sales flaunting very strong balance sheet figures which not many companies have been able to do in this slow moving economy. In the present scenario, the company poses very high liquidity of around $5.7 billion. Out of the total bookings in the quarter of $7.5 billion, 56% was solely contributed by the base of the company i.e. consulting. The gross margins failed to rise steeply, hence just showing a 1% increase as compared to the last year. The diluted earnings per share was $1.06 which was a mere 10% increase over the same period last year. Inspite of the fluctuating economic factors globally, the company has still managed to achieve revenue growth of 13% in local currency increase in outsourcing.
Moving ahead, as very well the name says, with a very disciplined management, the company is determined to put its foot print in various others fields. Although clients prefer slow moving development because of the global cash crunch. One of the biggest projects in line is with UBI, one of the largest PSUs in the East. It has the manpower which would help to provide UBI with a strategic transformation program with excellence.
Further a ten year contract has been signed with the second largest insurance company of France “Future Generali.“ The most noteworthy thing is Accenture’s Life Insurance Platform that has successfully served 40 leading insurers worldwide.
The box does not get filled up yet. Accenture has signed a Multi-Million Dollar contract with The Phoenix Partnership (TPP) to enable a patient administration system across nine community health systems and children hospitals. Thus with these big projects in hand, the company is not at rest and still trying to grab more and more projects under the roof.
Accenture has many enemies with whom it deals like friends. A new entrant is Infosys (NYSE: INFY) which has started focusing upon consulting now. Infosys is one of the leading IT companies and hence even though it is a new entrant it may still prove to be a tough competitor not only for Accenture, but also for IBM (NYSE: IBM). Though Infosys is venturing into a new field, the stock has ended up on a positive note. In this nagging economy which has forced companies to concentrate on cost cutting yet maintain quality and efficiency has given birth to outsourcing business and Infosys has very well been able to derive benefit out of outsourcing thus climbing up the software value chain rapidly with lesser obstacles.
The one stop consulting company thus seems to be bullish in future as it believes in delivering value to its clients with due respect and business discipline. Inspite of the highly volatile economy, Accenture has managed to post its first quarter results as per its expectations and promises to maintain its results at least in line with increasing demand. It is one of the very few companies which continue to return cash to its shareholders via cash dividends and share re-purchases. Hence to make it a part of one’s portfolio is not a very risky proposition.
shikhaa has no position in any stocks mentioned. The Motley Fool recommends Accenture Ltd.. The Motley Fool owns shares of International Business Machines Corp.. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!