Accenture beats Q3 estimates, raises FY16 EPS outlook
Last week, multinational management consulting services company Accenture plc (ACN) reported its fiscal 2016 third-quarter results that exceeded analysts’ estimates.
However, the share price of Accenture has lost more than 8% or $10 per share in the last two trading sessions. The share price closed at $109.29 on Monday.
As detailed below, the market has already factored in the minor issues faced by the company.
Thus, as of now, there is only a negligible chance for the share price to move downwards.
The Chicago, Illinois-based company reported fiscal 2016 third quarter revenue of $8.4 billion, compared to $7.8 billion in the corresponding period of fiscal 2015. The revenue estimate of analysts was $8.34 billion for the quarter ended May 31, 2016. Segment wise, Consulting revenue rose 12% to $4.62 billion, while Outsourcing revenue increased 4% to $3.81 billion. At the end of third-quarter, Accenturehad orders to the tune of $9.1 billion.
Accenture
Accenture’s third-quarter net income increased 13% to $897 million, from $794 million in the similar period of fiscal 2015. During the third-quarter, the company posted earnings per share of $1.41, up 14% from $1.24 per share in the year-ago corresponding quarter.
The primary reason for the share price to decline sharply is the outcome of the Brexit referendum, which caused a meltdown in the global financial markets. Secondly, the Credit Suisse analysts stated that the company’s growth has decelerated for the first-time in the past two years. The analysts are also of the view that the 17% increase in the unbilled services has negatively affected the cash flow by 3%. However, considering the slide in the share price by about $10 so far, we can argue that the minor negative news has been factored in already. The fact that Accenture has raised its fiscal 2016 fourth-quarter revenue and earnings forecast indicates the confidence of the management in the future performance of the company.
For the fourth-quarter, the company now anticipates net revenue in the range of $8.25 billion to $8.50 billion, against prior estimates of $8.39 billion. Accenture also raised its full year 2016 earnings to a range of $5.29 to $5.33 per share, from the prior guidance of $5.21 to $5.32. Thus, we can expect the share price to remain range bound with a bullish bias in the current-quarter.
The stock has declined below the 50-day moving average, but is near the next major support at 109. Furthermore, the RSI indicator is also on the verge of entering the oversold territory. Thus, we can expect the price to reverse after testing the support level.
So, a binary trader should purchase a one touch call option when the price hits the support level. The target price for the binary trade can be anywhere between $114 and $116. Technically, we expect a dead cat bounce once the price falls to 109. Thus, a three week time period (contract expiry) would be enough for the price to violate the one touch call option target.
