Earnings preview: Accenture braces for a strong Q3 amid broad-based growth

Accenture (NYSE: ACN) is a high-growth Wall Street firm that constantly evolves through business innovation and strategic acquisitions. The professional services company is scheduled to release its third-quarter financial results Thursday early morning.

Analysts predict that earnings will grow 6% annually to $1.89 per share in the May quarter, driven by a 7% increase in revenues to $11.04 billion. The revenue estimate falls within the company’s own forecast range. A decline in non-operating expenses will likely add to the bottom-line growth, which will be partially offset by a higher effective tax rate.

In the recent quarters, all of the company’s business segments, except financial services, registered growth. In the to-be-reported quarter, the Communications, Media & Technology segment is poised to benefit from the steady demand for software & platforms services across all the leading markets, especially North America. Reversing the recent trend, Financial Services revenue is expected to rise modestly, supported by the strength of the insurance business.

In the recent quarters, all of the company’s business segments, except financial services, registered growth

The Products segment, the largest business division, is estimated to have benefitted from the strength of the consumer goods sector and high demand for retail & travel services in the key markets in the third quarter. Meanwhile, the forecast for the Health & Public Service segment is a mid-single-digit drop in revenues.

Related: Cognizant Technology Q1 2019 Earnings Call Transcript

In the post-earnings conference call, the management is likely to provide updates on reviving the underperforming financial services business and the recent expansion of Accenture’s cloud partnership with Google (GOOG). Investors will also be looking for comments on the company’s strategy to deal with the deepening trade conflict between the US and China and the Briexit headwinds.

In the second quarter, solid revenue growth across all the major business units pushed up the top-line by 5% to $10.5 billion even as new booking rose to a record high of $11.8 billion. Consequently, earnings climbed 26% to $1.73 per share. The results also beat the Street view.

Last month, Accenture’s main rival Cognizant Technology (CTSH) reported a 3% drop in first-quarter earnings to $0.91 per share on revenues of 44.1 billion, which is down 5% year-over-year. The results were hurt mainly by slower growth in financial and healthcare services.

Accenture shares gained steadily since December last year when it dropped to a one-year low, outperforming the industry. The stock grew about 13% in the past twelve months and hit a record high earlier this month.

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