Accenture Stock Soared to a Record After Q1 Earnings Beat; Target Price $500 in Best Case

Accenture shares surged nearly 11%, scaling to a new record high in pre-market trading on Thursday after the global IT services company reported better-than-expected revenue in the fiscal first quarter and lifted its guidance for the second quarter.

The U.S-based IT giant said its revenues came in at $15.0 billion, an increase of 27% in both U.S. dollars and local currency, beating analysts’ estimates of $14.2 billion.

The company’s earnings per share (EPS) came in at $2.78, a 20% increase from $2.32 for the first quarter last year, which included $0.15 in gains on an investment; excluding these gains, EPS are up 28% from adjusted EPS of $2.17 in the first quarter last year. That was above the Wall Street estimates of $2.62 per share.

The IT services company said its operating income increases 29% to $2.43 billion, with an operating margin of 16.3%, an expansion of 20 basis points. New bookings are a record $16.8 billion, a 30% increase in both U.S. dollars and local currency from the first quarter last year, with record consulting bookings of $9.4 billion and outsourcing bookings of $7.4 billion.

Accenture also raised its business outlook for fiscal 2022 and now expects full-year revenue growth of 19% to 22% in local currency; EPS of $10.32 to $10.60; and free cash flow of $7.7 billion to $8.2 billion.

“Strong results beat high expectations, with 1Q revenue/EPS ahead by 5%, 2Q revenue ahead by 3% and FY22 revised outlooks on revenue/EPS ahead by 2% (adj for beat). Broad-based business momentum reflected in bookings growth of 30% y/y and a +700 bps raise to Accenture’s (ACN) FY22 growth outlook. Headcount up 8% q/q (by 50k) and attrition improves (-200bps q/q). Overall, outperformance on most fronts,” noted Bryan C. Bergin, equity analyst at Cowen.

Following the upbeat results, Accenture stock surged nearly 11% to $415.64 in pre-market trading on Thursday. It soared over 57% so far this year.

Analyst Comments

“After posting in-line results last quarter, the company resumed its strong run of exceeding expectations with revenues beating the top end of guidance by +4.2%. More importantly, F2022 constant currency revenue guidance was raised by 700 bps to the range 19-22%. Bookings were a record $16.8B in what is seasonally a weaker quarter, and the attrition rate actually declined to 17% from 19% last quarter,” noted Surinder Thind, equity analyst at Jefferies.

Accenture Stock Price Forecast

Fourteen analysts who offered stock ratings for Accenture in the last three months forecast the average price in 12 months of $384.93 with a high forecast of $410.00 and a low forecast of $350.00.

The average price target represents a 2.57% change from the last price of $375.30. Of those 14 analysts, 11 rated “Buy”, three rated “Hold” while none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $400 with a high of $500 under a bull scenario and $265 under the worst-case scenario. The firm gave an “Overweight” rating on the IT Services company’s stock.

“ACN is well-positioned to benefit from its outsized exposure to new and digital work post-COVID-19. Diversified vertical and geographic mix mitigate risk to revenue growth. Proven M&A capabilities provide optionality,” noted James Faucette, equity analyst at Morgan Stanley.

Several other analysts have also updated their stock outlook. Evercore ISI raised the target price to $445 from $410. Susquehanna lifted the target price to $435 from $386.

Technical analysis suggests it is good to buy as 100-day Moving Average and 100-200-day MACD Oscillator signals a strong buying opportunity.

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