Earnings preview: Accenture (ACN) likely to start Q1 on a strong note

Accenture plc (NYSE: ACN) is slated to report its earnings results for the first quarter of fiscal 2020 on Thursday before the market opens. The demand for services and solutions with favorable margins could be driving the top line and profitability for the quarter.

The revenues will be driven by its ability to secure new contracts, renew and extend existing contracts, and to deliver services and solutions to its clients. However, the results are likely to be impacted by economic conditions, including macroeconomic conditions and business confidence levels.

Read: Adobe Q4 earnings review

The company continued to make significant investments in strategic acquisitions, assets, and offerings, as well as branding and thought leadership to further enhance its differentiation and competitiveness. In fiscal 2019, Accenture continued to execute a strategy focused on industry and technology differentiation, increasingly taking an innovation-led approach to drive value for clients.

The company could be benefited from digital, cloud and security-related offerings, as well as from developments in areas such as artificial intelligence, augmented reality, automation, blockchain, Internet of Things, quantum computing and as-a-service solutions.

The bottom line could be impacted by currency exchange rate fluctuations on revenues and costs. The bottom-line growth could be the same as last quarter but is likely to lower due to higher costs and expenses. The company could incur additional expenses related to investments in developing services and solutions.

Analysts expect the company’s earnings to rise by 2% to $2.00 per share and revenue will increase by 5% to $11.14 billion for the first quarter. Accenture has surprised investors by beating analysts’ expectations in all of the past four quarters. The company recommended a “strong-buy” or “buy” rating with an average price target of $205.77.

Read: Ciena Q4 earnings snapshot

For the fourth quarter, Accenture posted a 10% growth in earnings driven by higher revenue and operating results, a lower effective tax rate, and a lower share count. The company posted revenue increases both in US dollars and in local currency across all its operating groups during the quarter.

For the first quarter, the company expects revenue in the range of $10.9-11.2 billion, up 5-8% in local currency. For fiscal 2020, Accenture expects revenue growth of 5-8% in local currency and diluted earnings to grow 4-7% to a range of $7.62-7.84 per share.

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