The Institutions Started Dumping Accenture 

Don’t Expect Too Much From Accenture’s Rebound 

Accenture’s (NYSE: ACN) FQ3 results and guidance were enough to spark a rebound in the stock but we aren’t betting heavily on it. The company’s guidance is good but the economic headwinds continue to mount and there are some fundamental issues with the market. The primary concern at this time is the institutions. The institutions hold nearly 75% of the stock and their activity took on a different tone in calendar Q2. While the net of Q2 activity is only slightly bearish the fact institutions are net-sellers is concerning. The institutions have been net buyers for the preceding 5 quarters and for 8 of the last 10. To make matters worse, the selling activity was heavy and the heaviest it has been for at least the last 12 quarters. This activity may be an anomaly, it may mean nothing, but until the stock confirms reversal we’re skeptical that it will. 

And the analyst activity isn’t that much better. The 19 analysts that have a current rating still have it pegged at a Moderate Buy with a price target 22% above the current price action but both have been slipping. The consensus rating is edging lower versus last year and last quarter while the price target is down 7% from the 12-month peak that was set just 30 days ago. The most recent activity includes 8 post-release commentaries that include 7 price target reductions and one initiated coverage at Neutral. The new coverage comes with a price target of $337compared to the $360.03 broad market consensus and the $302 target implied by the most recent 8 targets. That target assumes the stock is fairly valued where it trades now. 

Accenture Popped On Mixed Results And Guidance 

Accenture’s results and guidance are good but leave something to be desired when compared to the consensus estimates. The company reported $16.16 billion in revenue for a gain of 21.9% over last year and it beat the consensus by 125 basis points but margin pressure is present and the earnings guidance is weak. The business was underpinned by a 30% growth in Europe and Growth markets while North America grew by a slower 23%. On an industry basis, Communications & Technology and Products led with gains of 31% each. 

Moving on to the earnings, the company reported $2.79 in GAAP earnings for a gain of 23% over last year. The EPS was bolstered by a 10 basis point improvement in the operating margin that is less than expected. The EPS fell short of the consensus by $0.04 and the guidance reveals margin pressure will continue. There is a mitigating factor in the exit from Russia, the company estimates a $0.15 per share impact in earnings, but we think that was already priced into the market. 

In regard to the guidance, the company raised its outlook for revenue growth to a range of 25.5% to 26.5% versus the 22.35% consensus but tightened the range for earnings. Earnings are expected in a range of $10.61 to $10.70 compared to the $10.81 consensus and we see downside risk in the numbers. Foreign exchange was noted as a new headwind and we don’t think that headwind will diminish given the inflationary environment raging globally. 

The Technical Outlook: Accenture Might Spring Higher 

Accenture's daily price action suggests a bottom is in play and it may turn into a reversal. The caveat is that guidance is iffy relative to the consensus figures and the weekly charts paint a different picture. The price action on the weekly charts is still well below the 150-day EMA and suggests a consolidation and continuation rather than a bottom and reversal. In this scenario, we see the price retesting the recent lows before it retests the 150-day EMA and there is a chance of new lows. If the stock sets a new low (which would not be a surprise given the high 28X earnings multiple) we see it moving down to the $240 range. If we’re wrong and the stock does affect a move higher, we see resistance in the range of $310 to $320. 

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About Thomas Hughes

[email protected]

Experience

Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.

Areas of Expertise

Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies

Education

Associate of Arts in Culinary Technology

Past Experience

Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights. 

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