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How this company surprised markets with its US$12.1b revenue

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Accenture started as a small technology and business division in one of the big four accounting firms in the 1950s.

Today, Accenture (NYSE: ACN) has a strong global presence and ranks among the top professional services companies in the world. It is recognised for its technology consulting, systems integration, cloud computing and IT security capabilities.

With a reported US$44.33 billion in revenues in 2020, Accenture continues to build on its core businesses which include IT consulting and outsourcing, business consulting, and change and process improvements and management.

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From that small technology division more than 70 years ago, Accenture now has more than 537,000 people serving clients in more than 120 countries.

Strong financials

Accenture surprised the markets and analysts when it announced its most recent quarterly financial results in March 2021. For its fiscal quarter ending in Feb 2021, the company reported US$12.1 billion in revenues, an increase of 8% over the same period a year ago.

Despite the global slowdown that affected most of its clients at the height of the pandemic in 2020, Accenture rebounded and generated healthy revenue from its major markets including:

  • North America, which accounted for $5.6 billion in revenue
  • Europe contributed $4 billion in revenue
  • Growth markets posted $2.4 billion in revenue

Industries that deliver for Accenture

  • Health and Public Services: 14% or $2.3 billion in revenue
  • Financial services: 10% or $2.4 billion revenue
  • Communications, Media & Technology: 9% or $2.5 billion revenue

What's behind the strong performance?

As a major player in the IT consulting space, Accenture is well-placed to take advantage of the growth in various segments including cloud computing, IT security, artificial intelligence and global network integration.

In a recent report, Advance Market Analytics, a market research company for Fortune 500 companies, said the IT infrastructure utility service market is set for a strong growth that will deliver healthy revenues for the likes of Accenture.

As the world enters the post-pandemic period with heavy reliance on online and digital technology and services, Accenture's well-established position both in government and the private sector implementations will provide a solid platform for further growth.

Technical analysis: Accenture's share price performance

Long-term charts of Accenture show that the stock price has been making solid gains for much of the past 20 years. On a linear scale, the upward trend appears to have been accelerating in recent years with corrective pullbacks in late 2018 and early 2020 being very short-lived as underlying upward momentum quickly regained control. When viewed on a logarithmic scale, the upward trend since the Global Financial Crisis in 2008 has progressed at a remarkably consistent pace.

With recent gains pushing Accenture to new highs above US$284, we anticipate further gains for this stock. Any near-term dips are likely to be relatively short-lived and would initially be expected to encounter support in the region of US$260-270.

Acquisitions and strategic partnerships

Accenture has also been active in the acquisition trail. Looking at the company's recent acquisitions, it looks like it is expanding its capabilities particularly in what could be growth areas such as artificial intelligence and robotics.

Here are some of Accenture's recent acquisitions:

  • Cygni, a Swedish cloud-native full-stack development firm, will boost Accenture's cloud computing capabilities.
  • Imaginea, a cloud-native platform provider based in Mountain View, California,
  • Infinity Works, a UK-based company that specialises in cloud architectures
  • REPL Group, a UK-based technology consultancy specialising in solutions for supply chain, workforce management, store operations and retail customer experiences.
  • GRA, an Australian-based supply chain and logistics consulting firm
  • Pollux, a provider of industrial robotics and automation solutions,

In a statement during a recent analyst briefing session, Accenture CEO Julie Sweet said: "Covid-19 has hit a giant fast-forward button to the future and we believe the demand to innovate at unprecedented speed and scale with the rapid adoption of cloud, AI, and other disruptive technologies, is accelerating."

Accenture's recent acquisitions also showed the company's agility and determination to respond to market demands and changes.

In another interview, Julie Sweet shared her insight on a trend at the core of Accenture's digging deeper and wider into cloud computing.

She said: "The exponential change in technology that was happening pre-COVID is only going to continue, and that places an enormous pressure on companies, both leaders and those who are lagging, to think differently about how they run their business." She added: "Digital transformation will be increasing for years to come."

Conclusion

Given the growth outlook for IT consulting, cloud computing and the widening use of artificial intelligence in different industries, Accenture remains one of the strong players that can take advantage of future opportunities.

With its solid technology heritage and expertise, a global footprint and recent acquisitions in critical industry sectors, we consider it a buy.

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Alex Douglas is managing director of Monex Securities Australia (AFSL 363 972), and is responsible for the overall growth of Monex in this region. He has held senior executive positions with numerous financial services companies both in Australia and Asia over the past three decades. Early roles in the industry included being a foreign exchange voice broker, a trader on the floor of the Sydney Futures Exchange and a senior analyst with Standard & Poor's in Singapore.  Alex is a Certified Financial Technician (CFTe) and former board member of the International Federation of Technical Analysts (IFTA) as well as a sought-after author, speaker and market commentator.
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