Could this Tech Stock Earn Big Bucks?

Sonam is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

In its second quarter results, Accenture (NYSE: ACN) reported some good numbers, with record new bookings. Its take on the year ahead, however, is not so great. What does this mean for its investors? Let us take a look.

Good show there!

Accenture's net revenue went up by 4% this quarter to $7.1 billion. Net income saw an impressive 71% increase from the same quarter last year, to $1.1 billion. One-time tax benefits led to a record earnings per share of $1.65, or $1.00 without the benefits.

At 10% and 13% growth in revenue, respectively, financial services and health and public service proved to be the two most profitable sectors for the company.

The consulting giant experienced rising revenue in the Americas, where results improved to $3.3 billion up from $3 billion last year. Revenue from Asia Pacific saw modest 1% year-over-year growth while quarterly performance in the Europe, Middle East & Africa regions was flat. 

The company attributed most of its earnings growth to an increase in new bookings, $9.1 billion this quarter. At 48% of total bookings, consulting bookings hit a record of $4.4 billion.

Consulting looks weak

At $3.3 billion, outsourcing saw the greatest increase in revenue, up 9% from last year. Net revenue from consulting declined by 1% to $3.8 billion. The fall in consulting revenue was attributed to deferred investments by corporate customers.

Despite a slowdown in consulting, when it comes to sales and revenue growth, Accenture seems to be doing better than some others, especially given its first mover advantage.

International Business Machines' (NYSE: IBM), for instance, saw revenue from its global technology services fall by 2% last quarter. Its revenue from global business services was also lower, declining 3% year-on-year. Furthermore, IBM also witnessed a decline in revenue from global financing , down 4% from the previous year.

Technology and management consultancy Booz Allen Hamilton (NYSE: BAH) also saw a decline in its most recent quarterly earnings. Revenue declined to approximately $1.4 billion, down 3.5% from the previous year's $1.4 billion. The major reason for the decline was cited as a slowdown in demand amid poor market conditions. Diluted earnings per share were also lower, falling $0.06 to $0.38.

Partners in crime

Accenture's relationship with Cisco Systems, its partner in data center solutions, seems to be going strong. After receiving the "Supplier of the Year Award" in January, Accenture was honored by the "Cisco 2013 Customer Satisfaction Excellence Award," in recent weeks. Cisco also reported a successful last quarter. Its net sales were up 5% to $12.1 billion, with earnings per share of $0.59.

Looking forward

Accenture is calling for revenue results of between $7.3 billion and $7.5 billion in its next quarter. For the full year, the company expects revenue to fall in the lower half of the 5%-to-8% range (in local currency), the guideline it provided earlier. A semi-annual dividend of $0.81 per share was also announced.

Foolish take

Despite a not-so-great guideline for fiscal 2013, I have a good feeling about Accenture's long term prospects. The company has a very strong bookings position as of now, pointing towards higher revenue in the years to come.

What impresses me about Accenture's business strategy is the way it decided to outsource its operations to low-cost countries like India, giving it a comparative cost advantage over others.

Coupled with the company's innovative take on providing solutions at a low margins and high employee motivation, this sure looks like a good bet. With the global economy showing improvement, Accenture is sure to see a growth in revenue in times to come.


Sonam Chamaria has no position in any stocks mentioned. The Motley Fool recommends Accenture and Cisco Systems. The Motley Fool owns shares of International Business Machines.. 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!

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