Regardless of the economic environment, Accenture (NYSE:ACN) always finds ways to grow. Just look at the company’s latest quarterly report. Revenues increased by 14% to $6.7 billion and cash flows came to $1.2 billion. On the news, Accenture’s shares rose 4.3% to $55.92.
But can the company keep up the momentum? Will the lackluster macro situation finally take a toll? To see, here are Accenture’s pros and cons:
Pros
- Strong global platform. Accenture has more than 236,000 employees across 120 countries. Customers include 94 of the companies on the Fortune Global 100 as well as more than three-quarters of the Fortune Global 500. Accenture also provides a broad range of services. One is management consulting, which helps reduce costs and improve operations. There also is a big focus on helping companies with outsourcing and information technology systems. For example, Accenture has a thriving business implementing software from operators like Oracle (NASDAQ:ORCL) and SAP (NYSE:SAP).
- Strategic moves. Accenture’s management has a good track record of finding the next mega-trends. For example, they were spot-on with the move toward outsourcing. But now Accenture is looking at other hot areas. These include cloud computing, e-health, mobile, the smartgrid, analytics and social media.
- Rock-solid balance sheet. During the past year, the company spent $2.8 billion on share repurchases and dividend payments. In fact, the dividend yield is a decent 1.7%.
Cons
- Government business. This certainly is a significant part of Accenture’s business. However, with growing budget deficits, governments are tightening their belts. This is the case in both the U.S. and Europe.
- Discretionary projects. Major consulting projects easily can be delayed or even cancelled. This is especially the case during recessions, when companies try to find ways to cut back on major cost items.
- Competition. Accenture has many direct competitors like Deloitte Consulting, Bain & Company and Booz Allen Hamilton Holding (NYSE:BAH). What’s more, major IT companies have moved into the marketplace. Some of the players include IBM (NYSE:IBM), Hewlett-Packard (NYSE:HPQ) and Dell (NASDAQ:DELL).
Verdict
In its latest earnings release, Accenture indicated that it is predicting a general slowdown in the global economy, but the company still thinks it will show continued growth. In fact, Accenture understands that it is during tough times that some of the biggest opportunities emerge. This was the case in 2008-09 when the company continued to invest in its business.
The good news is bookings continue to be healthy — they hit a quarterly record of $8.4 billion, which brings the annual total to $28.8 billion.
In other words, there should be lots of juice for growth, both in the short and long term. Thus, the pros outweigh the cons on the stock for now.
Tom Taulli is the author of “All About Short Selling” and “All About Commodities.” You can also find him at Twitter account @ttaulli. He does not own a position in any of the stocks named here.
