Should You Buy Accenture Stock Ahead of Its Earnings Report?
The global economic picture is bleak, investor confidence is low, and most assets are off to the worst start of the year ever. By this point, many investors are scrambling to find any safe haven that they can. They’ve readjusted their goals. It’s okay if the stock doesn’t double this year…just as long as it doesn’t drop by 50%. Depending on your financial goals, Accenture stock might just be that safe haven stock.
Let’s examine why this is and discuss if you should buy Accenture (NYSE: ACN) ahead of its earnings report. Accenture is set to report its FY Q3 2022 on June 23.
What does Accenture do?
Accenture is a global professional services company. It specializes in digital, cloud and security but advises companies in more than 40 different industries and 120 countries. Accenture stock can call three-quarters of the S&P 500 a client. It classifies its business into five different categories. These categories are Communications, Financial Services, Health & Public Service, Products and Resources. Notably, Accenture also employs nearly 700,000 people.
According to CEO Julie Sweet, the “ability to learn” is one of the top things that Accenture looks for in new employees. For this reason, Accenture is reportedly training 150,000 new hires in the metaverse. This forces new employees to learn on the spot and adapt to a new work environment.
Accenture Stock Forecast
Plenty of companies have struggled through the past few years. Accenture’s business, on the other hand, continued without a hitch.
In 2021, Accenture reported annual revenue of $50.53 billion, up 14% YoY. It also reported a net income of $5.91 billion, up 15% YoY. More recently, the company reported FY Q2 2022 revenue of $15.05 billion, up 24% YoY. It also reported a net income of $1.63 billion, up 13% YoY.
Accenture also returned quite a bit of cash to investors last quarter. In total, it repurchased $1.7 billion worth of shares and paid $617 million in dividends. This equates to a quarterly dividend of $0.97 per share, up 10% from last year. As a general rule of thumb, stock buybacks and dividends are signs that a business is performing well.
Despite all this good news, Accenture stock is down 30% so far this year. But, it’s up 115% over the past five years.
Is Accenture Stock a Buy? Potential Upsides
There is so much uncertainty in the world around us. To start, companies are still navigating COVID-19 protocols. This includes keeping employees safe as well as navigating the business environment that COVID-19 is constantly disrupting. On top of that, companies need to deal with massive supply chain issues related to COVID-19 and the Russia/Ukraine war. There is also record inflation, which presents an issue for product-based companies.
On the technology front, there are dozens of new frontiers being explored. This includes artificial intelligence, self-driving cars, space travel, machine learning, quantum computing, cyber attacks/protection, the Internet of Things and more.
All of this is to say that there are tons of reasons why a company would need to hire Accenture. In a unique way, a world filled with uncertainty is actually a boon to Accenture’s business. This is because Accenture stock makes money by helping clients navigate this uncertainty. The more questions there are in the world the more reasons there is to call Accenture.
We can see evidence of this in Accenture’s sales record.
Evidence of a Growing Business
To start, Accenture’s sales didn’t decline during COVID-19. If anything, it experienced a revenue bump. There’s evidence that this revenue bump is still trending upward. In fact, Accenture stock reported $19.6 million in new bookings last quarter, up 22% from last year.
More evidence that Accenture’s business is booming is the hiring spree that it just went on. Over the past 18 months, Accenture hired 200,000 new employees. Not 2,000, not 20,000, but 200,000. For reference, Apple, the world’s most valuable company, employs 154,000 people. Accenture essentially hired an entire Apple in the past year and a half. This is a gigantic signal that Accenture’s management feels confident about the direction of the company.
Another thing that stuck out is that Accenture is wildly profitable. In 2021, it reported an adjusted EPS of $8.80. This is significantly higher than other hugely profitable companies like Apple ($5.61) and Amazon (3.24).
Very Strong 2022 so Far
Just by glancing at its investor report, you can tell that Accenture is crushing 2022 so far. Revenue for each of its five business segments is up over 20%. A few of them are up over 30%. On top of that, Accenture has $36.4 million in new bookings, EPS of $5.32, and a $1.94 cash dividend.
Again, these numbers come at a time when most businesses are just trying to stay afloat. If anything, most companies would be satisfied reporting that sales have stayed the same since last year.
One reason for Accenture’s strong performance could be that it is extremely well-diversified revenue across industries. Its income is spread out almost evenly among its five business segments.
With that said, no stock is without risk. Let’s examine a few downsides to buying Accenture stock.
Is Accenture Stock a Buy? Potential Downsides
Even though its business is growing quickly, investors really don’t consider Accenture stock as a growth stock. Its business has room to grow. But, with 700,000 employees, it’s also a very mature company.
There is also the risk that Accenture is expanding too rapidly. Again, 200,000 employees is an insane amount of new hires. Accenture could be falling into the same trap that Peloton did. Essentially, Peloton’s sales exploded during the pandemic since people were forced to live at home for months at a time. Peloton’s management mistook this artificial pandemic demand for real demand and started expanding rapidly. Once the pandemic ended, Peloton’s sales dropped off a cliff. Now, Peloton is in the process of reversing direction. Its stock has dropped from $160 per share to just $10 per share.
With 200,000 more employees, Accenture is surely racking up millions in new expenses. If it’s not careful, this decision could come back to haunt it.
Finally, before buying Accenture stock you still need to consider the macroeconomic climate. I mean, Accenture has reported nothing but good news so far this year yet its stock is down 30%. You have to assume this is almost entirely due to other factors. For example, the Fed increasing interest rates. Even though Accenture stock screams “buy me” it might still be worth waiting a few months to see how things shake out in the short term.
I hope that you’ve found this Accenture stock forecast to be valuable! As usual, please base all investment decisions on your own due diligence and risk tolerance.