Accenture on Tuesday reported first quarter results that exceeded Wall Street's net revenue expectations but missed earnings per share forecasts, as the company grappled with pricing pressures and underperforming contracts.
Accenture's net revenue for 2004's first quarter, ended Nov. 30, 2003, came in at US$3.26 billion, above the $3.11 billion consensus expectation from analysts polled by Thomson First Call.
Earnings per share were $0.33, on net income of $174.34 million, including a one-time $86 million benefit, or $0.06 per share. Consensus expectation had been for $0.28 per share, excluding the one-time benefit, meaning Accenture missed by a penny, a Thomson First Call spokesman said Tuesday.
Compared with 2003's first quarter, net revenue rose 11 percent in U.S. dollars and 4 percent in local currency, while earnings per share were up $0.06 including the one-time benefit, or flat otherwise.
Net income grew 37 percent with the one-time benefit, but fell 30 percent without it, compared with 2003's first quarter. The one-time benefit comes from a reduction in reorganization liabilities related to Accenture's transition to a corporate structure in 2001, the company said.
Gross margin, which is the gross profit as a percentage of net revenue, fell to 34.1 percent from 39.4 percent in 2003's first quarter, as a result primarily of the company's increasing shift toward outsourcing, whose gross margins tend to be lower than those in consulting; pricing pressure; and lower-than-expected margins on three contracts, Accenture said.
Net revenue broke down into 64 percent from consulting, which is the company's core business, and 36 percent from outsourcing, an area into which the company is diversifying. Compared with 2003's first quarter, consulting net revenue fell both in U.S. dollars (1 percent) and local currency (9 percent), while outsourcing net revenue rose 45 percent in U.S. dollars and 37 percent in local currency.
Looking ahead, Accenture will take a one-time charge of between $75 million and $100 million in 2004's second quarter related to real estate consolidation, primarily in the U.S. and the U.K. The process of consolidating locations and disposing of related fixed assets should be "substantially" completed during the second quarter, Accenture, based in Hamilton, Bermuda, said.
In 2004's second quarter, net revenue should be in the range of $3.10 billion and $3.25 billion, while earnings per share should be in the range of $0.21 to $0.27 excluding the expected one-time charge, Accenture said. These company estimates compare with Thomson First Call consensus expectations for net revenue of $3.06 billion and for earnings per share of $0.27, the Thomson First Call spokesman said. Those Thomson First Call expectations are current as of Monday, and haven't been revised yet after Tuesday's announcement, the spokesman said.
Investors have reacted negatively to the earnings announcement, which was made before the financial markets opened in New York on Tuesday. Accenture's stock (ACN) is down 14.05 percent to $22.27 in late morning trading on the New York Stock Exchange.