On Friday, Baird increased the price target for shares of Accenture plc (NYSE:ACN) to $370.00, up from the previous $350.00, while maintaining a Neutral rating on the stock. The adjustment follows Accenture's fiscal fourth quarter results, which slightly surpassed Wall Street's expectations in terms of revenue and earnings per share (EPS). The firm's guidance for fiscal year 2024 revenue also modestly exceeded analyst projections.
The report highlighted solid performance in Managed Services bookings, noting an increase of over 40% year-over-year. Additionally, bookings for GenAI, Accenture's artificial intelligence platform, showed a slight improvement. Despite these positive aspects, the analyst pointed to challenges in revenue growth. Accenture is guiding for a negative organic constant-currency growth in the first quarter of fiscal year 2025, indicating that businesses may be hesitant to increase spending on IT services.
The analyst's commentary provided insight into the rationale behind the maintained rating and adjusted price target: "We are pretty balanced given limited organic growth, though admit bookings strength and that initial F2025 guidance encapsulates consensus." This suggests that while there are strong elements such as bookings, the overall growth prospects are limited.
Accenture's stock is currently trading at a level that is approximately in line with its average premium to the S&P 500 index during the years 2017 to 2019. This comparison to historical premiums is despite the company's limited growth prospects as indicated by the guidance for the upcoming fiscal quarter.
In other recent news, Accenture exhibited a robust financial performance in fiscal year 2024, with bookings increasing by 14% to reach a record $81 billion, and revenue growing by 2% to total $65 billion. Adjusted earnings per share also saw a moderate rise to $11.95.
For fiscal year 2025, Accenture projected revenues between $16.85 billion and $17.45 billion, anticipating growth rates of 3% to 6% in local currency. Operating margins are expected to be between 15.6% and 15.8%, with earnings per share ranging from $12.55 to $12.91.
Several analyst firms have provided their assessments of Accenture. RBC Capital Markets raised its price target to $389, maintaining an Outperform rating, while Jefferies increased its price target to $355, maintaining a Hold rating. Piper Sandler upgraded Accenture from Neutral to Overweight, raising the price target to $395, and Goldman Sachs maintained a neutral stance.
In terms of company developments, Accenture plans to invest approximately $3 billion in acquisitions and return at least $8.3 billion to shareholders. The company also added approximately 24,000 employees in Q4, primarily in technology roles, and expects to see significant growth in GenAI bookings.
InvestingPro Insights
Accenture's (NYSE:ACN) recent performance and Baird's adjusted price target reflect a company navigating through a challenging growth environment with resilience. According to InvestingPro data, Accenture boasts a robust market capitalization of $222.87 billion and maintains a Price to Earnings (P/E) ratio of 31.99, which adjusts to 29.28 when looking at the last twelve months as of Q4 2024. The company's commitment to shareholder returns is evident, having raised its dividend for 5 consecutive years, with a notable dividend growth of 15.18% in the last twelve months as of Q4 2024.
InvestingPro Tips highlight that Accenture is a prominent player in the IT Services industry, with analysts revising their earnings upwards for the upcoming period, signaling confidence in the company's profitability. This is underscored by the company's strong return over the last three months, with a 17.87% price total return. For investors seeking detailed analysis, InvestingPro offers additional tips, with 12 more insights available on the platform, providing a comprehensive understanding of Accenture's financial health and market position.
With a solid track record of profitability over the last twelve months and a strong return over the last decade, Accenture's financials resonate with Baird's neutral yet optimistic stance. The company's ability to generate consistent cash flows, which can sufficiently cover interest payments, coupled with a moderate level of debt, presents a balanced risk profile for investors. The forward-looking metrics, such as the next earnings date slated for December 19, 2024, and the fair value estimates, provide a glimpse into Accenture's anticipated market trajectory.
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