Accenture (NYSE: ACN) Completes Recovery With Strong Earnings

It’s taken a little longer than others, but by the time the bell rang to end Thursday’s session, shares of Accenture (NYSE: ACN) had not only reclaimed their pre-coronavirus levels but had closed above them. That means the consulting behemoth’s stock is at all-time highs, only two months after plummeting more than 30% from them.

While many names in the tech industry have been bestowed with this honor in recent weeks, many stocks’s across other industries have struggled to even undo half of Q1's damage. As a $140 billion consulting and professional services company, traditionally not the fastest moving of industries, it speaks volumes to Accenture’s business model that they were able to achieve this at all.

Investors got a look into the engine on Thursday and indeed it was this look that gave shares the final push needed to complete the summit. Their fiscal Q3 earnings came out before the bell and beat analyst expectations across the board. While revenue was just below flat on the year, largely as the result of the economic carnage reaped by the first wave of COVID-19, operating margins came in higher than expected which helped with the forward-looking argument.

Decent Numbers

New bookings were also up year on year and management had no problem declaring a $0.80 dividend which was up 10% from this quarter last year. Over the past two years, Accenture has beaten expectations 100% of the time so it’s very reassuring to see them continue the pattern even through COVID and by the looks of things investors have been expecting as much. Shares have seen a strong bid all month and even a daily drop of 5% on June 11 was quickly undone as shares trended up to the release. They finished up more than 7% yesterday from Wednesday’s close and about 1% higher than their previous all-time high set last February.

Their CEO, Julie Sweet, said with the release that, “in times of crisis, our laser focus on creating value for our clients, our ability to deliver mission-critical services for the world’s leading companies, and our unwavering commitment to our people and to living our core values inside and outside Accenture make a difference. We delivered third-quarter financial results that aligned with our expectations, including revenue growth in the top end of our guided range as well as strong profitability and free cash flow, while continuing to invest in our business and our people.”

Upgrades and Downgrades

These results and these comments will do much to restore confidence to investors who might have been feeling a little shaky after the stock was downgraded last week. Wells Fargo left the party early when they bought their rating on the stock from Overweight to Equal-Weight. Their analyst Edward Caso felt things were getting a little frothy with the stock near all time highs and said that the "recovery in discretionary IT spending could take 4-6 or more quarters," while there is "limited to no near-term visibility on a turn in discretionary demand."

For such a pessimistic or realistic, depending on your viewpoint, tone, it was still a bit of a weird announcement because even as they reduced their rating, Caso increased his price target on the stock from $190 to $200 a share. Considering shares were trading at $202 the day of that note and closed yesterday at $217, there might be a few awkward conversations happening in Wells Fargo HQ this evening.

The downgrade was also at odds with an upgrade from Citi which came out the day before Well Fargo’s. Their analyst Ashwin Shirvaikar said in a note to clients that he felt “near-term uncertainty will likely be offset by a robust corporate focus on digital transformation and new tech deployment."

For investors looking to get involved after Thursday’s numbers, they can draw on having at least one fully bullish name in their corner and one kind of bullish name in the other. Either way, the stock is doing the talking for now and looks set to continue doing so.