According to an IDC report, the IT consulting market is expected to grow 4.1% annually till the year 2017. The significant reduction in oil prices in the last six months is also believed by the company executives to boost global economic growth that could lead to spending in IT capabilities.
Consulting and outsourcing services provider Accenture (NYSE: ACN) is counting on this growth as they revise their growth expectations upwards. Revenues for the quarter grew 7% over the year to $7.9 billion, ahead of the Street’s target of $7.68 billion. EPS grew 12% to $1.29 and beat the market projections of $1.20.
By segment, Accenture’s consulting revenues grew 4% to $4.09 billion and outsourcing revenues increased 11% to $3.8 billion. New bookings for the consulting business came in at $3.9 billion while outsourcing bookings grew to $3.8 billion.
Among operating metrics, utilization for the quarter was at 91% for the quarter compared with 88% a quarter ago and 87% a year ago. Most of the increase in the utilization is attributed to a change in calculation methodology as Accenture is now including all billable employees for the calculation.
Attrition for the quarter was 13% compared with 15% a quarter ago and 11% a year ago.
For the current quarter, Accenture expects revenues of $7.25 billion to $7.50 billion, ahead of the Street’s forecast of $7.45 billion. Accenture raised their fiscal revenue expectations in local currency from a growth of 4%-7% projected earlier to a growth of 5%-8%. The market was modeling revenues of $31.2 billion in US dollars, translating to a 3.9% growth. Accenture expects to end the year with an EPS of $4.66-$4.80 compared with market projections of $4.82.
Accenture continues to grow through acquisitions. Earlier this month, they announced the acquisition of Australia-based ad agency Reactive Media. Reactive Media is known for their capability to leverage mobile apps, e-commerce web sites, and social media to deliver differentiated customer experiences. It is among the largest independent digital agencies in Australia. Accenture will be able to leverage the acquisition to create “compelling digital customer experiences” by integrating Reactive Media’s digital capabilities with Accenture Interactive’s end-to-end marketing services and Accenture Digital’s creative design, customer experience, digital production, and e-commerce platforms. Terms of the deal were not disclosed.
In August this year, they also announced the acquisition of Stavanger, Norway-based Hytracc Consulting. Hytracc specializes in providing consulting services that include designing and implementation of hydrocarbon production data management and accounting solutions for oil and gas companies. Their solutions help their energy clients to better manage, track, and deliver hydrocarbons from the wellhead to the sales meter. Terms of the deal were not revealed. The acquisition will help Accenture strengthen their upstream production management services.
Accenture and Microsoft Tie-Up
Accenture also announced a significant tie-up with Microsoft recently. As part of the agreement, the two companies will produce a hybrid cloud bundle that is expected to be released in the coming year. The new platform will allow businesses to manage some portions of their private clouds and simultaneously outsource some portion of their resources to specialized entities. The deal will help Accenture grow their geographic presence and customer base.
Accenture’s stock is trading at $90.51 with a market capitalization of $56.8 billion. It touched a 52-week high of $91.36 last week.