Sluggish corporate spending crimps Accenture forecast

Reuters News
Posted: Mar 28, 2013 7:43 AM
Sluggish corporate spending crimps Accenture forecast

By Sruthi Ramakrishnan

(Reuters) - Outsourcing and consulting services provider Accenture Plc reduced its forecast for revenue growth, as its consulting business continued to be hurt by a slowdown in corporate discretionary spending, especially in Europe.

Accenture said it now expects revenue for the year ending August 31 to be below the midpoint of its forecast of 5-8 percent growth in local currency.

"In terms of what we expected six months ago, we did expect that we would turn to growth in the second half in consulting faster than we are," Chief Financial Officer Pamela Craig said on a conference call with analysts.

Accenture said consulting revenue fell by about 1 percent to $3.8 billion in the second quarter, while outsourcing revenue rose 9 percent to $3.3 billion.

"The forecast is a little disappointing, given the Street's generally expecting Accenture to come in at the upper half of its guidance range," Atlantic Equities analyst Christopher Hickey told Reuters.

"It seems there's an ongoing challenge of predicting some of the shorter-term consulting dynamics."

Craig, who retires in August, said consulting projects were coming in phases and chunks rather than as "giant" deals, and this was also affecting revenue.

Accenture expects the consulting business to return to a growth of at least low positive single digits in the current quarter, with the trend continuing to the end of the year.

The booking trend gives some comfort for a solid consulting recovery in the next few quarters, Hickey said.

The company said it expected new bookings in the year to trend towards the upper half of its forecast of $31 billion to $34 billion.

"The higher booking and lower revenue (forecasts) suggest slower book-to-bill conversion ratios for near future, though positive for long term growth," Susquehanna Financial Group analyst James Friedman wrote in a note.

Consulting bookings for the second quarter were $4.4 billion, compared with $4.05 billion a year earlier.

A general rebound in discretionary spending by companies is not expected until the second half of the year, analysts have said.

Accenture rivals such as Cognizant Technology Solutions Corp and Infosys Ltd reported growth in consulting revenue for the quarter ended December 31.

Accenture, which has 261,000 employees worldwide, reiterated its full-year earnings forecast of $4.24-$4.32 per share.

Analysts on average were expecting full-year earnings of $4.26 per share on revenue of $29.3 billion, according to Thomson Reuters I/B/E/S.

Second-quarter net income rose to $1.19 billion, or $1.65 per share, from $714.2 million, or 97 cents per share, a year earlier.

Excluding one-time items, it earned $1.00 per share.

Second-quarter revenue rose 4 percent to $7.06 billion.

Analysts on average had expected earnings of 97 cents per share on revenue of $7.07 billion.

The company said it repurchased or redeemed 8.8 million shares in the quarter, and its remaining repurchase authority was about $3.6 billion as of February 28.

The company said Craig will be succeeded by David Rowland, senior vice president of finance.

Accenture's shares were up 1.38 percent at $75.92 in afternoon trading on the New York Stock Exchange on Thursday.

The stock has risen 5.5 percent since the company reported first-quarter results in December, trailing the 9 percent gain in the S&P 500 IT Services (Industry) index during the same period.

(Reporting by Sruthi Ramakrishnan in Bangalore; Editing by Sreejiraj Eluvangal and Saumyadeb Chakrabarty)