Wide-moat Accenture posted a solid-as-ever quarterly performance, enjoying continued strength in its new digital, cloud, and security-related services.
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reported a steady start to fiscal 2017 with the firm posting net revenue near the upper end of its guidance (adjusting for foreign exchange impacts). Notably, the company’s performance was in line with our expectations and management mostly reiterated its full-year outlook. However, the company now expects a foreign exchange impact of negative 2% compared with 0%, as previously guided. Given the updated foreign exchange outlook, Accenture lowered its fiscal 2017 EPS midpoint to $5.76 from $5.87, which we have taken into account. The company’s quarterly performance remained solid as ever with the firm seeing continued strength in its new services (includes digital, cloud, and security-related services), with these new services now constituting more than 40% of group revenue and growing in the double-digits year over year. Our long-term outlook for Accenture remains unchanged and we believe the company is the gold-standard provider in the IT services market. We reiterate our $109 fair value estimate and wide economic moat rating. Nevertheless, with the company trading above our fair value estimate, we would seek a wider margin of safety before committing new capital to the name.
Andrew Lange is an equity analyst for Morningstar.
For the quarter, revenue rose 6% year over year to $8.5 billion (increased 7% in constant currency). Revenue growth was broad-based which reflects Accenture’s cross-industry strength. Still, the Resources segment continued to underperform, demonstrating ongoing macroeconomic issues in this segment. Quarterly bookings were in line and the company sees a good pipeline of work, which gives us confidence in the company’s performance for the rest of the year.
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