USA News Group  Commentary Issued on behalf of Avant Technologies Inc. VANCOUVER, BC, June 28, 2024 /PRNewswire/ -- USA News Group – The world is changing rapidly thanks to artificial intelligence (AI), with what's being called the Transformative AI era which comes with great benefits and also potential dangers. The economic impacts are global, with a new report from The Bank for International Settlements (BIS) urging central banks to adapt rapidly to AI advances. Now it's become apparent how important it i ...

Core Insights - Accenture's total revenue for the quarter ending May 2024 was $16.47 billion, reflecting a decline of 0.6% year-over-year [2] - The company's international operations are crucial for assessing its financial health and growth potential, especially in the context of a global economy [1] International Revenue Breakdown - Growth Markets contributed 17.3% of total revenue, amounting to $2.86 billion, which was a decline of 8.28% compared to expectations of $3.11 billion [3] - Europe generated $5.78 billion, accounting for 35.1% of total revenue, slightly below the consensus estimate of $5.87 billion [3] - In the previous quarter, Growth Markets and Europe contributed $2.82 billion (17.9%) and $5.6 billion (35.4%) respectively [3] Future Revenue Expectations - Analysts project total revenue of $16.26 billion for the current fiscal quarter, indicating a 1.7% increase year-over-year [4] - Expected contributions from Growth Markets and Europe for the current quarter are 18.6% ($3.03 billion) and 35.9% ($5.84 billion) respectively [4] - For the full year, total revenue is anticipated to reach $65.12 billion, a 1.6% increase from the previous year, with Growth Markets and Europe expected to contribute 17.8% ($11.6 billion) and 35.5% ($23.11 billion) respectively [4] Market Sentiment and Stock Performance - Accenture's reliance on international markets presents both opportunities and challenges, necessitating close monitoring of revenue trends [5] - The stock has increased by 2.7% over the past month, matching the rise of the Zacks S&P 500 composite, but has seen a decline of 10.9% over the past three months [8] - The Zacks Rank currently indicates a 4 (Sell) rating for Accenture, suggesting potential underperformance relative to the broader market [7]

Core Viewpoint - The average brokerage recommendation (ABR) for Accenture (ACN) is 1.80, indicating a general suggestion to buy the stock, but reliance solely on this metric may not be advisable due to potential biases in brokerage recommendations [1][2][4]. Group 1: Brokerage Recommendations - Accenture's ABR is based on 25 brokerage firms, with 14 Strong Buy and 2 Buy recommendations, translating to 56% and 8% of total recommendations respectively [1]. - Studies indicate that brokerage recommendations often lack success in guiding investors towards stocks with significant price appreciation potential [2][4]. - Brokerage firms tend to exhibit a strong positive bias in their ratings, with a ratio of five Strong Buy recommendations for every Strong Sell [2][3]. Group 2: Zacks Rank vs. ABR - Zacks Rank is a distinct measure from ABR, focusing on earnings estimate revisions and providing a more timely indicator of stock price performance [4][5]. - The Zacks Rank categorizes stocks from 1 (Strong Buy) to 5 (Strong Sell) and is based on empirical research correlating earnings estimate revisions with near-term stock price movements [5]. - The Zacks Consensus Estimate for Accenture has declined by 1.1% over the past month, leading to a Zacks Rank of 4 (Sell) for the company, suggesting caution despite the favorable ABR [6].

Core Insights - Accenture Plc reported disappointing third-quarter earnings, with sales of $16.47 billion, slightly below analyst consensus of $16.55 billion, reflecting a 1% year-over-year decline in U.S. dollars but a 1.4% increase in local currency [1] - Adjusted EPS of $3.13 fell short of the analyst consensus of $3.15 [1] - The company achieved significant milestones in Generative AI, with $2 billion in sales year-to-date and $500 million in revenue year-to-date [1] - Accenture plans for fourth-quarter revenues between $16.05 billion and $16.65 billion, slightly below consensus of $16.56 billion, and expects fiscal 2024 adjusted EPS of $11.85 to $12.00, compared to consensus of $12.10 [1] Revenue and Earnings Guidance - Fourth-quarter revenue guidance is set at $16.05 billion to $16.65 billion, with a consensus of $16.56 billion [1] - Fiscal 2024 adjusted EPS guidance is revised to $11.85 to $12.00 from a prior range of $11.97 to $12.20, against a consensus of $12.10 [1] - Revenue growth for fiscal 2024 is expected to be between 1.5% and 2.5% in local currency, revised from a prior range of 1% to 3% [1] Analyst Reactions - Following the earnings report, Accenture shares increased by 1% to $309.13 [2] - BMO Capital reduced its price target from $375 to $350 while maintaining a Market Perform rating [2] - Susquehanna lowered its price target from $360 to $350, keeping a Neutral rating [2] - TD Cowen adjusted its price target from $294 to $293, maintaining a Hold rating [2]

Core Viewpoint - Accenture's stock appears undervalued at 20 times free cash flow despite a slight earnings miss in Q3 2024, with strong growth in new bookings and a positive outlook for future sales growth [1][2][3] Group 1: Earnings Performance - Accenture reported Q3 earnings of $3.13 per share, slightly below the analyst forecast of $3.15, with sales of $16.5 billion, matching expectations [1][2] - Year-over-year sales declined by 1%, while GAAP earnings decreased by 3% to $3.03 per share [2] - Operating profit margin improved by nearly 2 percentage points to 16% [2] Group 2: Future Outlook - Accenture anticipates a 2% year-over-year sales growth for the full fiscal year 2024, with an expected operating profit margin of 14.8% [3] - The company projects GAAP earnings between $11.29 and $11.44, with adjusted earnings around $11.93, slightly below the analyst forecast of $12.08 [3] Group 3: New Business and AI Growth - New bookings for the quarter increased by 22% to $21.1 billion, indicating a potential return to sales growth [2] - Generative AI new bookings reached $900 million in Q3 and $2 billion year-to-date, representing a 50% increase compared to the average of the previous two quarters [2] Group 4: Valuation Metrics - With an estimated free cash flow of around $9 billion and a market cap of $180 billion, Accenture's price-to-free-cash-flow ratio stands at 20, suggesting the stock is not expensive [3] - If Accenture can convert its 22% bookings growth into equivalent earnings growth, it could present a strong buying opportunity [3]

Core Insights - Accenture plc reported lower-than-expected third-quarter fiscal 2024 results, with earnings of $3.1 per share and total revenues of $16.5 billion, both missing consensus estimates and showing year-over-year declines [1][2]. Revenue Details - Managed Services revenues were $8 billion, up 2% year-over-year but below the estimate of $8.2 billion. Consulting revenues were $8.5 billion, down 3% year-over-year but above the estimate of $8.3 billion [2]. - Health & Public Service revenues grew 8% year-over-year to $3.5 billion, exceeding the estimate of $3.4 billion. Resources segment revenues were flat at $2.3 billion, missing the expectation of $2.5 billion. Product segment revenues were $5 billion, flat in USD but up 2% in local currency, surpassing the estimate of $4.9 billion [2]. - Communications, Media & Technology revenues decreased 4% to $2.8 billion, meeting estimates. Financial Services revenues fell 8% to $2.9 billion, missing the estimate of $3.1 billion [3]. - Geographically, EMEA revenues were $5.8 billion, down 2% and meeting estimates. Growth Markets revenues were $2.9 billion, down 4% but up 8% in local currency, missing the estimate of $3 billion. North America revenues increased 1% to $7.8 billion, beating the estimate of $7.7 billion [3]. Booking Trends - Accenture reported new bookings of $21.1 billion, a 22% increase year-over-year, with consulting bookings at $9.3 billion and Managed Services bookings at $11.8 billion [4]. Operating Results - The gross margin for the quarter was 33.4%, unchanged from the previous year. Adjusted operating income was $2.7 billion, also flat year-over-year, while the adjusted operating margin increased by 10 basis points to 16.4% [5]. Balance Sheet & Cash Flow - At the end of the quarter, Accenture had cash and cash equivalents of $5.5 billion, up from $5.1 billion in the previous quarter. The company generated $1 billion in cash from operating activities and had capital expenditures of $14.3 million [6]. - Free cash flow was $1 billion, with $1.4 billion spent on repurchasing 4.3 million shares and $811 million paid out in dividends [6]. Guidance - For the fourth quarter of fiscal 2024, Accenture reduced its revenue guidance to a range of $16.05-$16.65 billion, with the midpoint below the consensus estimate [7]. - For fiscal 2024, the adjusted earnings per share guidance was lowered to $11.85-$12, with the midpoint also below the consensus estimate. The company expects an adjusted operating margin of 15.5% and operating cash flow of $9.3-$9.9 billion [8].

Market Overview - U.S. stocks traded mostly higher, with the Dow Jones gaining over 50 points, up 0.17% to 38,898.96, NASDAQ rose 0.01% to 17,864.13, and S&P 500 gained 0.09% to 5,491.81 [1] Company Performance - Accenture Plc shares gained around 7% after reporting third-quarter fiscal 2024 results, with sales of $16.47 billion, slightly below analyst consensus of $16.55 billion, down 1% year-over-year in U.S. dollars but up 1.4% in local currency [2] - MGO Global, Inc. shares surged 154% to $1.1672 after announcing the expected acquisition of Spetner Associates, projecting annualized revenue to increase to approximately $28 million [2] - Zapp Electric Vehicles Group Limited shares rose 147% to $3.42, anticipating first customer deliveries of the i300 in Q4 and projecting over 5,000 unit sales for the fiscal year ending September 30, 2025 [2] - Femasys Inc. shares increased by 23% to $1.17 after receiving CE Mark approval from the EU MDR for its products [2] Declining Stocks - Tempest Therapeutics, Inc. shares dropped 27% to $2.0847 following new data from a Phase 1b/2 clinical study [3] - Trevena, Inc. shares fell 37% to $0.226 after announcing preclinical data for TRV045 [3] - Sonnet BioTherapeutics Holdings, Inc. shares decreased by 29% to $1.10 after announcing the exercise of warrants for gross proceeds of $3.4 million [3] Commodities - Oil prices increased by 0.9% to $82.34, while gold rose by 1.1% to $2,371.90 [4] - Silver traded up 3.8% to $30.69, and copper rose 1.9% to $4.5755 [5] European Market - European shares were higher, with the eurozone's STOXX 600 gaining 0.67%, Germany's DAX up 0.73%, and France's CAC 40 rising 1.14% [5] - The Bank of England held the Bank Rate at 5.25% [5] - Passenger car registrations in the EU fell 3.0% year-over-year to 911.7 thousand units in May [5] Asia Pacific Markets - Asian markets closed mixed, with Japan's Nikkei gaining 0.16% and Hong Kong's Hang Seng Index declining 0.52% [6] - The People's Bank of China maintained key lending rates [6] - Hong Kong's unemployment rate remained unchanged at 3% [6] Economic Indicators - The U.S. current account deficit rose by $15.8 billion to $237.6 billion in Q1, exceeding market estimates [7] - The Philadelphia Fed Manufacturing Index fell to 1.3 in June, missing expectations [7] - U.S. initial jobless claims decreased by 5,000 to 238,000, slightly above market estimates [7] - Housing starts declined by 5.5% to an annualized rate of 1.277 million in May [7]

Financial Data and Key Metrics Changes - Revenues for Q3 were $16.5 billion, reflecting a 1% decline in US dollars but a 1.4% increase in local currency, slightly above the midpoint of FX adjusted guidance range [23] - Adjusted operating income was $2.7 billion, with an adjusted operating margin of 16.4%, an increase of 10 basis points from the same quarter last year [26] - Free cash flow for the quarter was $3 billion, resulting from cash generated by operating activities of $3.1 billion [26] Business Line Data and Key Metrics Changes - New bookings were $21.1 billion for the quarter, representing 22% growth in US dollars and 26% growth in local currency, with a book-to-bill ratio of 1.3 [22] - Consulting revenues were $8.5 billion, a decline of 3% in US dollars and 1% in local currency, while managed services revenues were $8 billion, up 2% in US dollars and 4% in local currency [23] - Technology services and strategy and consulting grew low single digits, while operations remained flat [23] Market Data and Key Metrics Changes - Revenue growth in North America was 1% in local currency, led by public service, while EMEA revenues declined 2% in local currency [24] - Growth markets saw an 8% increase in revenue in local currency, driven by Argentina and Japan [24] - The company continues to take market share against its closest global publicly traded competitors, with revenues of $16.5 billion for the quarter, up 1.4% in local currency [14] Company Strategy and Development Direction - The company is focused on being the reinvention partner for clients, emphasizing large-scale transformations and leveraging deep industry and functional expertise [10][11] - Investments in GenAI are a key growth area, with over $900 million in new GenAI bookings this quarter, totaling $2 billion in sales year-to-date [12] - The company has completed 35 acquisitions year-to-date, investing $5.2 billion, compared to $2.5 billion for the entire FY 2023 [13] Management's Comments on Operating Environment and Future Outlook - Management noted that client spending has developed differently than expected, with a focus on large-scale transformations that convert to revenue more slowly [9] - The company expects revenues for Q4 to be in the range of $16.05 billion to $16.65 billion, reflecting an estimated 2% to 6% growth in local currency [44] - For the full fiscal year 2024, the company anticipates revenue growth of 1.5% to 2.5% in local currency, with an inorganic contribution approaching 3% [45] Other Important Information - The company has promoted 97,000 employees globally, reflecting its commitment to career development [15] - The company achieved a brand value of $81.9 billion, an 11% increase, ranking 20th on Kantar BrandZ's Top 100 Most Valuable Global Brands list [15] - The company continues to invest in its workforce, with approximately 13 million training hours this quarter [14] Q&A Session Summary Question: Can you elaborate on the stronger growth expected next year? - Management highlighted the focus on large transformation deals and the acceleration of bookings, indicating a unique position to capture growth as spending increases [50][52] Question: What is the strategy around the increase in debt? - Management explained that the increase in debt is part of normal treasury operations, utilizing a credit facility established during the pandemic [64] Question: How much of the managed services bookings is new versus renewals? - Management noted that the managed services bookings include a healthy mix of both new and renewal contracts, driven by larger transformational deals [71] Question: What is enabling growth improvements in the CMT vertical? - Management attributed growth in the CMT vertical to a focus on eliminating technology debt and leveraging new technologies, particularly GenAI [80]

Core Insights - Accenture's third-quarter earnings indicate a strategic positioning for growth in the technology sector despite slight misses in earnings and revenue projections [2][11] - The company's strong performance in generative AI bookings, totaling $900 million for the quarter and $2 billion for the fiscal year, highlights its commitment to this transformative technology [3][4] Financial Performance - For Q3 FY24, Accenture reported adjusted earnings per share (EPS) of $3.13, below the consensus estimate of $3.16, and a revenue of $16.47 billion, slightly missing the anticipated $16.54 billion [2][11] - The company's guidance for the upcoming quarter projects revenue between $16.05 billion and $16.65 billion, which is slightly below the previous consensus estimate of $16.53 billion [6] Strategic Focus - Accenture's emphasis on generative AI aligns with industry trends, as organizations increasingly seek to leverage AI technologies for efficiency and new revenue streams [4][11] - CEO Julie Sweet highlighted strong new bookings of over $21 billion, representing a 22% increase year-over-year, reinforcing the company's strategy to be a leading partner in digital transformation [4] Market Outlook - Analysts maintain a cautiously optimistic view on Accenture's prospects, with a current price target of $360.50, indicating a potential upside of 16% [5] - Despite minor earnings misses, the company's strong focus on AI and impressive bookings suggest potential for long-term value creation [11] Service Segments - Accenture operates through five interconnected service segments: Strategy & Consulting, Technology, Operations, Industry X, and Song, each addressing different client needs [7][8][9] - The Technology segment includes solutions in cloud computing, cybersecurity, data analytics, and AI, while Industry X focuses on Industry 4.0 technologies [8][9] Competitive Edge - Accenture's extensive service portfolio, global presence in over 120 countries, and a workforce of over 750,000 employees enable it to deliver tailored solutions to clients [10] - The company's commitment to innovation and strategic investments in cutting-edge technologies solidify its reputation as a trusted advisor in the professional services sector [10]

Core Insights - Accenture's shares increased following the release of third-quarter results, where revenue fell short of analysts' expectations, but net income exceeded them [1][2] - AI-related bookings showed significant growth, reaching $900 million for the quarter and totaling $2 billion for the fiscal year-to-date [1][3] - The company has adjusted its guidance for the full fiscal year, narrowing revenue growth projections and lowering earnings per share estimates [4] Financial Performance - Accenture reported third-quarter revenue of $16.47 billion, a decrease from $16.56 billion in the same quarter last year and below the expected $16.55 billion [1] - Net income for the quarter was $1.93 billion, or $3.04 per share, down from $2.01 billion and $3.15 per share last year, but above the expected $1.91 billion and $3.01 per share [2] AI and Bookings - The company achieved $900 million in new bookings related to generative AI for the quarter, contributing to a total of $2 billion in AI-related bookings year-to-date [3] - Overall new bookings reached $21.06 billion, reflecting a 22% increase from the previous year, with 44% from consulting services and 56% from managed services [3] Dividend and Share Buyback - Accenture declared a quarterly dividend of $1.29 per share, scheduled for payment on August 15, with a record date of July 11 [4] - The company repurchased $1.4 billion of its own stock during the quarter and has $3.3 billion remaining in its buyback plan [4] Guidance Adjustments - For the fourth quarter, Accenture projected revenue between $16.05 billion and $16.65 billion, compared to analyst estimates of $16.54 billion [4] - The full-year revenue growth guidance was adjusted to a range of 1.5% to 2.5%, narrowed from 1% to 3%, and diluted earnings per share guidance was lowered to $11.29 to $11.44 from $11.41 to $11.64 [4]