Accenture’s Q3FY19 earnings result beat consensus expectation and its own guidance with strong show across geographies and verticals, but weaker order bookings especially in outsourcing (down 21% y-o-y) is a cause for concern for Indian IT. Performance once again was driven by communication media & technology (CMT), resources and products. Strong y-o-y growth across geographies in cc terms — North America, Europe and Growth Markets up 9%, 5%, and 13%, respectively.
Outsourcing and consulting both reported strong growth of 7% y-o-y and 10% y-o-y, respectively, in cc terms. Management has raised the FY19 revenue growth guidance to 8-9% (from 6.5-8.5% earlier; with -3% FX impact), implying stable outlook in near term. In Q4FY19, growth is likely to be 5-8% y-o-y (-2% Fx impact) to $10.85-11.15 billion (consensus: $11 billion). A strong financial performance with steady outlook indicates near-term stability.
Dollar revenue grew 4% y-o-y (8% in cc terms, 7% organic cc terms growth) to $11.1 billion (consensus: $11.04 billion; guidance: $10.8-11.10 billion). In terms of geography, Americas, Europe and Growth Markets grew 9%, 5%, and 13%, respectively, y-o-y in cc terms. In terms of verticals (cc terms), CMT, financial services, healthcare & public service, products and resources grew 7%, 4%, 6%, 8% and 19% y-o-y, respectively. Growth in financial services improved in line with the commentary. Overall bookings declined 10% y-o-y to $10.6 billion with book-to-bill ratio at 0.95x [5-year average: 1.07x; Q3 average (7 years): 1.09x] — weakest in the history of company (Q1FY09: 0.96x). Consulting book-to-bill stood at 0.96x [5-year average: 1.04x; Q3 average (7 year): 1.03x], while outsourcing book-to-bill stood at 0.94x [5-year average: 1.10x; Q3 average (7year): 1.15x]. Consulting increased 2% y-o-y in dollar terms, but outsourcing bookings declined by 21% y-o-y. Q3FY19 order book witnessed weakness especially in outsourcing; however, management was confident of stronger Q4FY19. We see the weaker order booking especially in outsourcing a concern for Indian IT.
Accenture has delivered a strong 9MFY19 with a 9% y-o-y growth in Q3FY19 (cc terms). Outsourcing momentum continued in line with our expectations and we expect the trajectory to sustain in near term.