By Rishika Sadam
Consulting and outsourcing services provider Accenture Plc slightly raised its full-year profit forecast, but the outlook largely fell short of market expectations, sending its shares down as much as 4 percent on Thursday.Accenture has invested heavily in fast-growing businesses such as digital and cloud services, amid stiff competition from Cognizant Technology Solutions Corp and IBM Corp.Revenue growth in its consulting unit, which contributes a higher profit margin than its outsourcing business, slowed in the second quarter ended Feb. 28. The 2.6 percent revenue growth was the slowest in more than a year."The consulting business tends to provide a higher profit profile and so if you've got greater contribution from areas like outsourcing, it is more difficult for the company to continue to raise margins over time," said Edward Jones analyst Bill Kreher.The company also reported a smaller second-quarter profit on Thursday, hurt in part by higher operating costs, which rose 4.3 percent to $7.62 billion.
Accenture plans to spend about $1.5 billion on acquisitions in the year ending August, Chief Financial Officer David Rowland said on a call with analysts.Up to Wednesday's close the company's shares have risen 8 percent this year and hit record levels earlier this week, as investors awaited its quarterly report."High investor optimism was met with just ho-hum results. I do not think it is more than that. It is a natural pause," Kreher said.
Accenture said it expects adjusted profit of $5.70 to $5.87 per share for the year ending August, compared to a prior forecast of $5.64 to $5.87 per share.Analysts on an average had expected a profit of $5.87 per share, according to Thomson Reuters I/B/E/S.
Accenture said second-quarter net revenue rose 4.7 percent to $8.32 billion, as it benefited from strong demand for its digital, cloud and security-related services, which made up more than 45 percent of revenue.Net income attributable to Accenture fell to $838.8 million or $1.33 per share in the quarter, from $1.33 billion or $2.08 per share, a year earlier.Analysts on average had expected profit of $1.30 per share and revenue of $8.34 billion.Dublin, Ireland-domiciled Accenture's shares were down 3.6 percent at $121.87 on the New York Stock Exchange in midday trading. (Reporting by Rishika Sadam in Bengaluru; Editing by Sai Sachin Ravikumar)
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Updated Date: Mar 23, 2017 22:04 PM