On Tuesday, Baird expressed a cautious outlook on Accenture plc (NYSE:ACN), maintaining a Neutral rating and a $370.00 price target on the stock. Currently trading at a P/E ratio of 31.1x and with a market capitalization of $225.8 billion, InvestingPro analysis suggests the stock is slightly overvalued at current levels.
The firm anticipates that Accenture's financial year 2025 earnings per share (EPS) guidance might be revised downward by approximately 2-2.5%, potentially leading to a slight decline in the stock's value. This expectation is based on Accenture's history of issuing EPS guidance below consensus in 10 out of the last 16 quarters, which typically resulted in the stock price dropping on the day earnings were announced.
The analyst at Baird acknowledged the strength of Accenture's business, referring to it as a "bearish fresh pick" and expressing admiration for the company's franchise. This view aligns with InvestingPro's Financial Health Score of "GOOD," though revenue growth has been modest at 1.22% over the last twelve months. The analyst pointed out the company's recent trend of constant currency revenue growth being relatively flat and noted that the stock is currently trading at 28 times its calendar year 2025 estimated EPS.
The firm also noted that while there are factors that could support the stock price, such as strong bookings in Generation AI or an improvement in constant currency guidance, the potential downward adjustment in EPS guidance remains a concern.
Accenture's stock performance following earnings announcements was highlighted as a pattern of interest. According to Baird's analysis, in instances where the company has guided below the fiscal year EPS consensus, the stock has typically experienced a decline on the day the earnings were reported.
In summary, Baird's position on Accenture reflects a balance between appreciation for the company's overall business and caution regarding the potential impact of forthcoming EPS guidance adjustments on the stock's performance. With the next earnings report scheduled for December 19, 2024, investors seeking deeper insights can access comprehensive analysis and 12 additional ProTips through InvestingPro's detailed research report. The firm's current price target of $370.00 remains unchanged, as does its Neutral rating.
In other recent news, Accenture continues to make strategic moves to bolster its service offerings and financial performance. The company recently acquired Allitix, a consulting firm specializing in Anaplan (NYSE:PLAN) business planning solutions. This acquisition is expected to enhance Accenture's connected planning capabilities and contribute to its annual revenue growth.
Accenture's subsidiary, Accenture Federal Services, secured a $1.6 billion contract from the U.S. Air Force to enhance its multi-cloud Cloud One environment. This contract is expected to improve the Air Force's cloud capabilities and align with its modernization goals.
In the realm of cybersecurity, Accenture made a strategic investment in Reality Defender, a firm specializing in deepfake detection. This move aims to enhance defenses for clients against deepfake fraud. In a collaboration with Google (NASDAQ:GOOGL) Public Sector, Accenture has also established the 'Federal AI Solution Factory.' This initiative aims to expedite the development and testing of AI solutions for federal agencies.
Accenture reported record bookings of $81 billion and revenue of $65 billion in fiscal year 2024. Additionally, the company completed the sale of notes totaling approximately $4.99 billion. Analysts from Mizuho (NYSE:MFG) Securities, TD (TSX:TD) Cowen, and BMO (TSX:BMO) Capital have responded positively to these developments, with TD Cowen upgrading Accenture's rating from Hold to Buy.
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