Shares of Accenture plc (NYSE: ACN) were down 4% on Thursday after the company delivered mixed results for the fourth quarter of 2023 and provided full-year guidance that came below Street expectations. The stock has gained 12% year-to-date. Here are the key points from the earnings report:
Earnings beat, revenue miss
For the fourth quarter of 2023, Accenture reported revenues of $15.98 billion, which were up 4% year-over-year, but narrowly missed estimates of $16.07 billion. GAAP net income decreased 17% to $1.37 billion, or $2.15 per share, versus last year. Adjusted EPS rose 4% to $2.71, beating analysts’ projections of $2.66.
Business performance
On its quarterly conference call, Accenture said the macro environment turned out to be more challenging than expected during the year, with lower discretionary spend, slower decision-making, and headwinds in the communications, media and technology industries. However, the company continues to see strong demand in areas like cloud migration and modernization, modern ERP, and data and artificial intelligence (AI).
Accenture plans to invest $3 billion in AI. Although in early stages, generative AI is maturing rapidly and the company believes it can generate significant value from this over time. Accenture currently has around 300 projects in AI across all industries with banking, public service, consumer goods and utilities leading in activity. While some of its more digitally mature clients want to move faster, others are either testing the waters or choosing to wait until they are better prepared.
Accenture’s new bookings for the fourth quarter dropped 10% YoY to $16.6 billion. Consulting made up 51% of new bookings while Managed Services accounted for 49%. In Q4, revenues from Managed Services increased 10% YoY while revenues from Consulting fell 2%.
During the quarter, revenues grew 1% in local currency in North America, driven by growth in public service, health and utilities. This growth was partly offset by declines in areas like communications and media, software and platforms, banking and capital markets, and high tech. Revenues increased 7% in Europe and 6% in Growth Markets in local currency, helped by growth in banking and capital markets, chemicals and natural resources, industrial, energy, and public service.
Lower-than-expected outlook
For the first quarter of 2024, Accenture expects revenues to range between $15.85-16.45 billion. For the full year of 2024, the company expects revenues to grow 2-5% in local currency. GAAP EPS is expected to range between $11.41-11.76, representing a YoY increase of 6-9%. Adjusted EPS is estimated to range between $11.97-12.32, representing growth of 3-6% YoY. Analysts were projecting EPS of $12.45 for the full year.
Capital return
During the fourth quarter, Accenture repurchased or redeemed 3.2 million shares for $1 billion, and paid dividends of $706 million. The Board of Directors approved $4 billion in additional share repurchase authority, bringing total outstanding authority to approx. $6.5 billion. The company also raised its quarterly dividend by 15% to $1.29 per share, payable on November 15 to shareholders of record on October 12.