Accenture To Gain From Strong GenAI Project Acceleration Despite Decline In Demand For Smaller Projects: Analyst

RBC Capital Markets analyst Daniel R. Perlin reiterated the Outperform rating on Accenture Plc ACN, raising the price forecast to $381 from $374.

The company reported second-quarter fiscal 2024 sales of $15.80 billion compared with the consensus of $15.84 billion, flat Y/Y in U.S. dollars and local currency. 

Perlin writes that this quarter’s results and guidance reduction continue to reflect a challenging macro environment, while management noted an additional decline in demand for smaller projects with the start of the calendar year.

GenAI projects, however, continue to accelerate, with bookings of $600 million in the quarter, bringing year-to-date bookings to $1.1 billion, the analyst adds.

FY24 guidance tightened lower, with the third quarter guidance below prior street expectations. 

Management called out some of the factors that support its guidance, including its increase in inorganic growth, which should contribute to the second half of 2024 and continued benefit from previous larger deals that will layer in.

Incorporating the results and guidance, Perlin lowered the FY24 revenue estimate to $65.1 billion from $65.5 billion. The analyst reduced the adjusted EPS estimate to $12.05 from $12.25.

For FY25, Perlin lowered its revenue estimate to $68.2 billion from $68.7 billion. The analyst reduced the adjusted EPS estimate to $12.85 from $13.10.

The analyst’s current price forecast presents a premium to similar growth peers. However, Perlin views this as sustainable, given the company’s consistent total return proposition (capital allocation in dividends and buybacks).

In addition, Accenture is uniquely positioned to help clients migrate to a digital core in order to access opportunities with AI and GenAI.

Investors can gain exposure to the stock via IShares U.S. Tech Independence Focused ETF IETC and Natixis Vaughan Nelson Select ETF VNSE.

Price Action: ACN shares are trading lower by 1.99% to $338.17 on the last check Friday. 

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