Is a Beat in the Cards for Accenture (ACN) in Q1 Earnings?

Accenture plc ACN is scheduled to report first-quarter fiscal 2019 results on Dec 20, before the market opens.

While the top line is likely to benefit from strength across all segments, the bottom line is expected to benefit from higher revenues and strong operating performance.

So far this year, shares of Accenture have gained 1.6% compared with 3.9% rise of the industry it belongs to. The Zacks S&P 500 composite has declined 2.7% in the same period.

Strength Across Segments to Boost Revenues

The Zacks Consensus Estimate for revenues of the Communications, Media & Technology segment for first-quarter fiscal 2019 is pegged at $2.16 billion, indicating year-over-year growth of 15.9%. Segmental revenues are likely to be driven by growth across all geographic regions in Software & Platforms, and Communications & Media, led by Software & Platforms in North America. In fourth-quarter fiscal 2018, this segment’s revenues of $2.09 billion increased 15% year over year.

The consensus mark for the Financial Services segment revenues is pegged at $2.10 billion, indicating year-over-year growth of 2.1%. Segmental revenues are expected to be driven by growth across all industry groups and geographic regions, led by Banking & Capital Markets in Europe and Growth Markets. In fourth-quarter fiscal 2018, segmental revenues of $2.01 billion increased 3% year over year.

The consensus estimate for the Health & Public Service segment revenues are pegged at $1.79 billion, indicating year-over-year growth of 9.8%. Segmental revenues are likely to be driven by growth in Public Service across all geographic regions and Health in North America. In fourth-quarter fiscal 2018, segmental revenues of $1.71 billion increased 6% year over year.

The consensus mark for the Products segment revenues is pegged at $2.95 billion, indicating year-over-year growth of 14.1%. Segmental revenues are expected to be driven by growth across all geographic regions in Consumer Goods, Retail & Travel Services and Industrial. In fourth-quarter fiscal 2018, segmental revenues of $2.80 billion increased 12% year over year.

The consensus estimate for the Resources segment revenues are pegged at $1.49 billion, indicating year-over-year growth of 12.5%. Segmental revenues are likely to be driven by growth across all industry groups and geographic regions led by Chemicals & Natural Resources, and Energy. In fourth-quarter fiscal 2018, segmental revenues of $1.52 billion increased 20% year over year.

Strength across segments is likely to contribute to year-over-year growth of Accenture’s total revenues in first-quarter fiscal 2019, the Zacks Consensus Estimate for which is currently pegged at $10.48 billion, indicating an increase of 10% year over year. In fourth-quarter fiscal 2018, net revenues of $10.1 billion grew 11% year over year.

Accenture PLC Revenue (TTM)

Accenture PLC Revenue (TTM) | Accenture PLC Quote

Booking Trends Upbeat

The Zacks Consensus Estimate for consulting bookings in the to-be-reported quarter is pegged at $6.26 billion, indicating year-over-year growth of 6.2%. For outsourcing bookings, the consensus mark stands at $4.23 billion, up 5.8% year over year. Solid demand for Accenture’s services is expected to result in increased bookings in the to-be-reported quarter.

In fourth-quarter fiscal 2018, consulting bookings of $6.1 billion improved 19.6% year over year and outsourcing bookings of $4.7 billion declined 6.4% year over year.

Earnings Likely to Grow Year Over Year

The Zacks Consensus Estimate for earnings per share in the to-be-reported quarter is pegged at $1.84, indicating year-over-year growth of 2.8%. We expect the company to witness bottom-line growth on the back of higher revenues and, operating and non-operating income, which are likely to be partially offset by higher effective tax rate.

In fourth-quarter fiscal 2018, adjusted earnings of $1.58 per share came ahead of the year-ago figure by 10 cents.

Our Model Suggests a Beat

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided, especially if they have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Accenture has an Earnings ESP of +0.89% and a Zacks Rank #3, a combination that increases the odds of an earnings beat.

Accenture PLC Price and EPS Surprise

Accenture PLC Price and EPS Surprise | Accenture PLC Quote

Key Picks

Here are a few stocks from the Zacks Business Services sector that investors may consider as our model shows that these have the right combination of elements to beat on earnings in their fourth-quarter 2018 results:

S&P Global SPGI has an Earnings ESP of +0.97% and a Zacks Rank of 3. The company is expected to report results on Feb 5. You can see the complete list of today’s Zacks #1 Rank stocks here.

Aptiv APTV has an Earnings ESP of +0.33% and a Zacks Rank #3. The company is expected to report results on Feb 7.

Delphi Technologies DLPH has an Earnings ESP of +0.27% and a Zacks Rank #3. The company is expected to release results on Feb 20.

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