Tuesday, November 17, 2020

An International Equity holding: Accenture PLC (ACN, $241.78): “An Unforgettable Accent(ure)” by: Riley Arnold, AIM Student at Marquette University

Accenture PLC (ACN, $241.78): “An Unforgettable Accent(ure)”

By: Riley Arnold, AIM Student at Marquette University      

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.


• Accenture PLC (NYSE: ACN) engages in the provision of management consulting, technology, and outsourcing services in three primary markets: North America, Europe, and Growth Markets. 

• Despite the continuing economic difficulties due to COVID-19, in Q4 2020, ACN announced an increase in dividends from $0.80/share to $0.88/share. Additionally, management approved further share repurchase programs to benefit shareholders.

• Bookings for the year surpassed $50 billion, a company record. Along with the success from the bookings vertical, ACN’s revenue pipeline has remained robust, with losses in certain SBUs compensated by large gains in other areas.

• Demand for digitization services and cloud platforms has been accelerated by the pandemic and continues to increase as more companies shift online. Higher R&D spending coupled with the expansion of ACN's client base has built a solid foundation which the company has used to navigate the pandemic.

• ACN has outlined several ESG initiatives within the company culture, proving to be a global leader in company ethics, diversity, and community inclusion. 

Key points: Accenture Plc has continued to grow and expand their expertise in their already established positions across all 13 covered industries. As the company continues to employ their large cash base to acquire talent and expand their offerings, ACN continues to expand their market share, growing at four times the rate of FY 2019.

Around the same time, the company announced an increase in their dividend to $0.88/share, an increase in 10% from FY 2019. Furthermore, management approved more than $5B in outstanding shares to be repurchased in the short-term. Despite the hardships initially endured by the firm, they have continued to emphasize the importance of the shareholder. Benefits from ACN's programs will continue to help the portfolio in the near- and mid-terms.

ACN's strong recovery from the initial pandemic crash has come in large part to their success with cloud storage and other digitization services. In their Q4 2020 earnings call in August, the company disclosed how they current deliver 17 clients with over $100MM in bookings revenues each, with these numbers expected to increase. With the announcement of Accenture Cloud First, the company has established a new, multi-service group of over 70,000 cloud professionals to aid their future clients. As ACN continues to capitalize on the tailwinds from this digitization trends, the firm is poised for strong growth through FY 2022.

As of Q4 2020, ACN announced that approximately 45% of their workforce was composed of women, with a 50/50 balance goal to be achieved by 2025. Furthermore, the company has announced programs to increase their African American, Hispanic American, and Latinx communities in the United States. With already extensive community engagement through their involvement programs, Accenture continues to create a positive brand image and foster a top-notch company culture.

What has the stock done lately?

Since the beginning of 2020, the company’s stock has increased 13.10%. Rebounding from their pandemic low of -30% return, Accenture has continued to rely on their diversified business model to recoup lost revenues in an uncertain macroeconomic environment. In the past month, the stock has risen 4%.

Past Year Performance: Accenture has returned 25.30% YoY and continues to grow from inorganic expansion and sector tailwinds. While the stock is trading near its all-time high, the increased dividend growth and continued shareholder benefits, combined with the robust revenue pipeline, marks a strong outlook for the company into 2021 and beyond.

Source: FactSet


My Takeaway

The initiatives undertaken by Accenture in the second half of 2020 have proven to be successful. From the recent acquisitions of N3 to Enimbos, the company continues to build their talent around cloud-based services. In addition to Accenture Cloud First, these long-term projects are certain to pay off. I believe that as ACN continues to grow this platform, diversify their product portfolio, and take care of their employees, it will see steady growth long into the future. Despite the lack of clarity into the future of the economy given the pandemic, I am confident that Accenture has the ability to overcome any challenges the firm may face moving forward.

Source: FactSet