Key points to remember
- Accenture plc expects profits to fall by around 6% in fiscal 2023 due to the surging US dollar, as around 60% of business operations take place outside the United States.
- The Dublin-based consultancy firm has seen an increase in new business as outsourcing work overtakes consultancy.
- Accenture reported fourth-quarter profit of $15.42 billion, up 15% year-on-year as demand for IT and cloud services remained strong.
Accenture plc recently announced its results for the fourth quarter and fiscal year ending August 31, 2022. The news has investors and analysts talking about the company’s performance during this turbulent time as global fears of a possible recession increase. Even with that, however, there is still demand for IT and cloud services as companies seek to expand their capabilities.
The Dublin-based consultancy reported strong financials, but the stock fell further slightly as challenges are expected in 2023, with the rising US dollar impacting bottom line.
We’ll explain 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 more than 120 countries who work together to generate revenue.
Accenture reports its revenue in three different categories. They break down revenue streams by geographic market, industry, and job type. The three geographic markets include North America, Europe and Growth Markets. Both types of work include consulting and outsourcing.
Industry groups include:
- Communications, Media and Technology
- Financial services
- Health and public service
- Some products
ACN Revenue Breakdown
For the fiscal year ended August 31, 2022, Accenture had revenue of $61.6 billion, up 22% from the prior year, with net income of $6.99 billion. . Consulting brought in $34.1 billion while outsourcing revenue was $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, missing analysts’ forecasts by just 0.2%. Consulting revenue was $8.33 billion, up 14% year-over-year. Outsourcing revenue was $7.09 billion, up 16% year over year for this quarter.
It’s also worth mentioning that when it comes to new bookings in the fourth quarter, consulting accounted for 46% of the total, while outsourcing accounted for 54%.
What’s going on with ACN shares?
While the entire stock market is experiencing volatility due to soaring inflation and the Fed raising rates to combat it, the ACN has certainly been hit. Given that the recent earnings report came out around the same time as the rate hikes, it’s hard to say how much of an impact this macro news had on this individual stock since the broader market reacted. at the news.
ACN stock as of October 11, 2022 is at $255.64, some analysts say the stock has a one-year target of $316.17.
ACN stock slipped after the earnings report despite results nearing target. Many large companies with operations outside the United States have warned that currency problems could lead to lower profits. Accenture’s management estimated that its bottom line would be hit by 6% by the rising US dollar in 2023.
The company also forecast first-quarter revenue to be between $15.20 billion and $15.75 billion, compared to $16.07 billion expected by analysts. The reason for the move is that the company consolidated all of its earnings in US dollars for financial reporting. In doing so, revenues are slightly lower due to exchange rates.
Accenture announced a 15% dividend hike of $1.12 per share on Sept. 22, so shareholders would receive payment on Nov. 15. The dividend yield is currently 1.7% and the company has increased its dividend five times over the past five years.
ACN also repurchased 2.1 million shares for $605 million during the fourth quarter.
Accenture partnerships and acquisitions
We need to discuss some of Accenture’s partnerships and acquisitions that could help explain why the stock has been rising recently and could improve bottom line in 2023 as the company seeks to expand its services globally.
In the earnings report released Sept. 22, Accenture informed shareholders that they had agreed to acquire Inspirage, an intellectual property and consulting firm specializing in helping clients improve supply chains. The exact financials of this transaction were not disclosed at the time.
On October 4, Accenture announced that it was collaborating with Mars to work on “the factory of the future”. Mars is the global leader in 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 these areas of expertise. It was also mentioned that the companies would be working on creating a new cloud platform to improve manufacturing applications with the use of AI. Only time will tell how this partnership will work out, as many are hoping for what this factory will look like.
What’s next for ACN stock?
Analysts will be watching for the impact of the rising US dollar on ACN’s results. Accenture management clearly expects the consequences of the surging US dollar to be evident in financial reporting in 2023. United States. This means that the rising value of the US dollar will hurt the company’s bottom line for the foreseeable future until global currencies stabilize.
ACN is working to improve its cloud offering through acquisitions and partnerships. It is undeniable that there is money to be made with cloud services and cybersecurity. It’s just about making sure business decisions pay off.
Microsft also named Accenture its Global IS Partner of the Year a few months ago. Accenture works with Microsoft to leverage Azure cloud technology to offer industry-specific solutions for custom migration and modernization. With many businesses around the world looking to make a digital transformation, there will be money to be made in this area.
The next earnings report is scheduled for December 16, 2022, when the company will share first quarter 2023 financial results.
How should you invest?
There are many different companies to invest in around AI, cloud technology, and cybersecurity. There is hope that these industries can be resilient in times of high inflation since digital security will continue to be a priority. Many global companies are also looking to add cloud-based supply chain management software to speed up and improve processes.
It’s worth remembering that the overall stock market is down due to soaring inflation and Fed rate hikes to combat it. That said, there are still ways for you to invest your money right now.
If you want to invest in technology without having to sift 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-driven, AI-backed investment strategies.
As an investor, you want to know that you are putting your money into companies that will increase in value. Accenture appears to be in a strong position as this global consulting firm can help businesses achieve the digital transformation necessary to survive in today’s market. We will monitor the impact of the US dollar situation and inflation on them.
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