Accenture earnings may disappoint as competition increases

Technology consulting firm Accenture forecast earnings that may fall short of analysts' estimates amid increasing competition from Indian providers.

Profit for fiscal 2014, which began this month, will be $4.42 to $4.54 a share, the company said yesterday in a statement. That compared with a $4.51 average estimate of analysts surveyed by Bloomberg.

Fourth-quarter earnings were $1.01 a share, matching the average forecast, while revenue rose to $7.09 billion, beating the $6.9 billion average estimate.

The company is facing a mounting challenge from emerging providers of information-technology services, mostly out of India, such as Tata Consultancy Services, Cognizant Technology Solutions and Infosys.

Bookings were $8.4 billion, down from $9.2 billion a year earlier, with 46 per cent coming from the more profitable consulting business.

“The bookings number is disappointing,” said Arvind Ramnani, an analyst with BNP Paribas who has a hold rating on the shares. “Consulting is a little bit lighter than I expected.”

Slow growth in the global economy is causing some businesses to pare back their spending, said Keith Bachman, an analyst at BMO Capital Markets in New York.

“Accenture’s growth is slowing even as the performance of large Indian IT vendors has improved,” Mr Bachman said in a note to investors before earnings were released. “As these companies have become larger, they are now in a position to deliver consulting projects in certain areas such as analytics, mobility and cloud.”

The company also raised its semiannual dividend 15 per cent to 93 cents a share. Fourth-quarter net income rose to $671 million, or $1.01 a share, from $578 million, or 88 cents, a year earlier.

The company is considered a bellwether for the information- technology market because its earnings cycle ends one month sooner than competitors.

IBM, the largest technology-services provider, is scheduled to announce earnings October 16th.

While IBM has also seen revenue slow in its consulting division, it has a better plan for buybacks and dividends that return money to shareholders, said Steven Milunovich, an analyst at UBS AG in New York. “We would argue - and activists may take notice - that with no debt Accenture could be doing more,” he said in a note to investors this week. “If recent soft results continue, shareholders might get antsy.” (Bloomberg)