NYSE: ACN
ACCENTURE PLC
Report created Mar 26, 2012 Page 1 OF 6
Based in Dublin, Ireland, Accenture is a global management consulting, technology services and
outsourcing company. The two main lines of business are consulting and outsourcing. The company is also
organized along five key verticals served, including Communications, Media & Technology; Financial
Services; Products; Health & Public Service; and Resources. In fiscal 2011, approximately 44% of revenue
was generated in the United States.
Argus Recommendations
Twelve Month Rating SELL HOLD BUY
Five Year Rating SELL HOLD BUY
Analyst's Notes
Sector Rating
Analysis by Jim Kelleher, CFA, March 23, 2012
ARGUS RATING: BUY
• Earnings beat and positive momentum on bookings
• Accenture posted strong fiscal 2Q12 results, as earnings of $0.97 per share topped the consensus
forecast of $0.86.
• Total bookings approaching $8 billion resulted in a book-to-bill ratio of 1.17, led as usual by
outsourcing bookings.
• Accenture remains well positioned for market- and peer-leading growth thanks to its unmatched
breadth of industry expertise and geographic reach.
• We expect growth to continue in all of Accenture's core competencies, geographic regions, and
industry operating groups, given global trends such as workforce mobility, SAP and ERP
implementations, the need for cohesive global IT, and the need for multinational companies to work
within multiple regulatory environments.
INVESTMENT THESIS
BUY-rated Accenture plc (NYSE: ACN) delivered revenues at the top of its guidance
range for fiscal 2Q12 (ended February 29, 2012), while beating Street EPS expectations
significantly. GAAP earnings of $0.97 topped the consensus estimate of $0.86 and rose
29% year-over-year. Total bookings were slightly stronger than anticipated, resulting in a
book-to-bill ratio of 1.17 for the quarter. Accenture continues to generate strong bookings
and profitable revenue growth despite challenges in the global economic environment.
Accenture carried out a management change during the second quarter, which some
investors thought might be indicative of soft performance in a key vertical. Nonetheless,
both outsourcing bookings and the most directly impacted operating group
(Communications, Media, and Technology) delivered strong results in line with our
aggressive expectations.
In our view, Accenture is well positioned for superior growth in relation to the market
and its peer group. The company continues to enjoy strong competitive advantages in the
consulting, outsourcing, and technology niches in which it plays, thanks to its unmatched
Market Data
Pricing reflects previous trading week's closing price.
200-Day Moving Average
Target Price: $74.00
52 Week High: $65.89
52 Week Low: $47.40
Closed at $64.79 on 4/6
Price
($)
50
40
Rating
BUY
HOLD
SELL
Key Statistics pricing data reflects previous trading day's closing
price. Other applicable data are trailing 12-months unless
otherwise specified
Market Overview
Price
Target Price
52 Week Price Range
Shares Outstanding
Dividend
$64.88
$74.00
$47.40 to $65.89
731.02 Million
$1.35
Sector Overview
Sector
Sector Rating
Total % of S&P 500 Market Cap.
Technology
OVER WEIGHT
19.00%
Financial Strength
Financial Strength Rating
Debt/Capital Ratio
Return on Equity
Net Margin
Payout Ratio
Current Ratio
Revenue
After-Tax Income
MEDIUM-HIGH
0.1%
59.6%
8.6%
0.35
1.45
$29.23 Billion
$2.53 Billion
($)
0.67
0.60
0.75
0.68
0.79
0.76
2.66
Annual
0.92
0.91
0.96
3.40
16.85
19.08
1.62
10.04
$6.46
$47.43 Billion
Forecasted Growth
EPS
0.97
0.92
1.01
3.85 ( Estimate)
1.02
1.04
1.07
1.11
4.23 ( Estimate)
Revenue
1 Year EPS Growth Forecast
13.24%
5 Year EPS Growth Forecast
12.00%
1 Year Dividend Growth Forecast
0%
Risk
($ in Bil.)
5.7
5.2
6.0
5.4
6.5
6.5
7.2
7.2
7.6
Q1
Q2
Q3
2010
Q4
Q1
Q2
Q3
2011
Q4
Q1
22.3
Annual
FY ends
Aug 31
Key Statistics
Current FY P/E
Prior FY P/E
Price/Sales
Price/Book
Book Value/Share
Market Capitalization
60
Quarterly
Argus assigns a 12-month BUY, HOLD, or SELL rating to each
stock under coverage.
• BUY-rated stocks are expected to outperform the market (the
benchmark S&P 500 Index) on a risk-adjusted basis over the
next year.
• HOLD-rated stocks are expected to perform in line with the
market.
• SELL-rated stocks are expected to underperform the market
on a risk-adjusted basis.
The distribution of ratings across Argus' entire company
universe is: 46% Buy, 49% Hold, 5% Sell.
Valuation
70
Quarterly
Under Market Over
Weight Weight Weight
27.4
7.3
7.5
7.7
30.0 ( Estimate)
Q2
Q3
2012
Q4
7.8
Q1
8.0
8.2
8.5
32.4 ( Estimate)
Q2
Q3
2013
Beta
Institutional Ownership
1.07
72.95%
Q4
Please see important information about this report on page 6
©2012 Argus Research Company
Argus Analyst Report
NYSE: ACN
ACCENTURE PLC
Report created Mar 26, 2012 Page 2 OF 6
Analyst's Notes...Continued
breadth of industry expertise and geographic reach. We expect
growth to continue in all of Accenture's core competencies,
geographic regions, and industry operating groups, given global
trends such as workforce mobility, SAP and ERP implementations,
the need for cohesive global IT, and the need for multinational
companies to work within multiple regulatory environments. We
reiterate our BUY rating on ACN to a 12-month target price of $74
(raised from $66).
RECENT DEVELOPMENTS
ACN is up 21% year-to-date as of 3/23/12. The stock rose
9.8% in 2011, consistent with outperformance among large-cap
technology companies relative to small and midcap names last year.
The Argus peer group of information processing hardware &
solutions companies declined 9.8% in 2011, versus a flat
performance in the S&P 500. In 2010, Accenture shares advanced
17%, compared with an 8% simple-average advance for the peer
group.
For fiscal 2Q12 (ended February 29, 2012), Accenture reported
revenue before reimbursements of $6.80 billion, up 12%
year-over-year (13% in local currency) and at the top end of the
guidance range of $6.5-$6.8 billion. Accenture surprised with
GAAP earnings of $0.97 per diluted share, up 29% year-over-year;
the Street had been looking for EPS in the $0.85-$0.86 range.
Accenture raised its full-year revenue growth guidance to
10%-12% in local currency from a prior 7%-10%. It also raised its
fiscal 2012 earnings forecast to $3.82-$3.90 per diluted share. By
way of background, Accenture in December 2011 projected
full-year 2012 earnings of $3.76-3.84 per diluted share, down from
initial guidance of $3.80-3.88 offered in September. The EPS
forecast was reduced because of macroeconomic challenges and a
negative 1% expected impact from foreign exchange; previously,
management had been modeling foreign exchange as a modest
positive.
In recasting its 2012 EPS guidance, Accenture continues to
expect a negative currency effect for the year, though this should be
outweighed by the higher revenue outlook. We also note that
Accenture tends to guide conservatively and then beat expectations.
During the post- release conference call, CEO Pierre Nanterme
attributed the strong revenue and profit performance to Accenture's
comprehensive offerings and integrated strategy, which 'resonates
with
clients.'
CFO
Pamela
Craig
stated
that
the
stronger-than-anticipated first half would enable Accenture to raise
its full-year financial targets.
In local currency, revenue grew in double digits in most
operating groups (industry verticals) and regions on a
year-over-year basis. In terms of the two main competencies, 2Q
outsourcing revenue of $3.02 billion rose 19% from last year and
1% sequentially. Consulting revenue of $3.78 billion rose 7.6%
from last year but declined 7.5% sequentially.
In 2Q12, Accenture reported new bookings of nearly $8 billion.
Consulting bookings of $4.05 billion rose 14% year-over-year,
Growth & Valuation Analysis
GROWTH ANALYSIS
($ in Millions, except per share data)
Revenue
COGS
Gross Profit
SG&A
R&D
Operating Income
Interest Expense
Pretax Income
Income Taxes
Tax Rate (%)
Net Income
Diluted Shares Outstanding
EPS
Dividend
GROWTH RATES (%)
Revenue
Operating Income
Net Income
EPS
Dividend
Sustainable Growth Rate
VALUATION ANALYSIS
Price: High
Price: Low
Price/Sales: High-Low
P/E: High-Low
Price/Cash Flow: High-Low
Financial & Risk Analysis
2007
21,453
15,411
6,041
3,522
—
2,493
-130
2,619
896
34
1,243
862
1.97
0.35
2008
25,314
18,128
7,186
4,151
—
3,012
-92
3,108
911
29
1,692
823
2.65
0.42
2009
23,171
16,330
6,841
3,948
—
2,644
-36
2,678
740
28
1,590
787
2.44
0.50
2010
23,094
15,843
7,251
4,326
—
2,915
-15
2,914
854
29
1,781
767
2.66
1.13
2011
27,353
18,966
8,387
4,915
—
3,470
-26
3,512
959
27
2,278
742
3.40
0.90
17.7
35.4
27.7
23.9
16.7
53.3
18.0
20.8
36.1
34.5
20.0
68.6
-8.5
-12.2
-6.0
-7.9
19.0
39.8
-0.3
10.2
12.0
9.0
125.0
43.5
18.4
19.1
27.9
27.8
-20.0
46.6
$44.03
$33.03
1.8 - 1.3
22.4 - 16.8
15.4 - 11.6
$43.04
$24.76
1.4 - 0.8
16.2 - 9.3
10.6 - 6.1
$43.33
$26.33
1.5 - 0.9
17.8 - 10.8
11.6 - 7.0
$51.43
$19.19
1.7 - 0.6
19.3 - 7.2
13.1 - 4.9
$63.66
$47.40
1.7 - 1.3
18.7 - 13.9
12.3 - 9.2
FINANCIAL STRENGTH
Cash ($ in Millions)
Working Capital ($ in Millions)
Current Ratio
LT Debt/Equity Ratio (%)
Total Debt/Equity Ratio (%)
RATIOS (%)
Gross Profit Margin
Operating Margin
Net Margin
Return On Assets
Return On Equity
RISK ANALYSIS
Cash Cycle (days)
Cash Flow/Cap Ex
Oper. Income/Int. Exp. (ratio)
Payout Ratio
2009
4,542
2,752
1.44
0.0
0.0
2010
4,838
2,996
1.46
0.1
0.1
2011
5,701
3,565
1.45
—
0.1
29.5
11.4
6.9
12.9
59.2
31.4
12.6
7.7
14.2
62.8
30.7
12.7
8.3
15.9
67.8
—
—
190.6
—
—
—
199.6
—
—
—
235.1
26.5
The data contained on this page of this report has been
provided by Morningstar, Inc. (© 2012 Morningstar, Inc.
All Rights Reserved). This data (1) is proprietary to
Morningstar and/or its content providers; (2) may not be
copied or distributed; and (3) is not warranted to be
accurate, complete or timely. Neither Morningstar nor its
content providers are responsible for any damages or
losses arising from any use of this information. Past
performance is no guarantee of future results. This data
is set forth herein for historical reference only and is not
necessarily used in Argus’ analysis of the stock set forth
on this page of this report or any other stock or other
security. All earnings figures are in GAAP.
Please see important information about this report on page 6
©2012 Argus Research Company
Argus Analyst Report
NYSE: ACN
ACCENTURE PLC
Report created Mar 26, 2012 Page 3 OF 6
Analyst's Notes...Continued
such as finance and health.
Internally, Accenture looks at the two broad categories of
outsourcing and consulting mainly in terms of bookings;
simultaneously, management looks at the operating groups in terms
of revenues. Revenues in Communications, Media & Technology
(CMT) of $1.48 billion were up 16% year-over-year (17% in local
currency). CFO Craig cited a contract in Europe that she said had a
'short-term' positive impact on revenue growth. Within CMT,
outsourcing demand was very strong and even improved
sequentially amid a slight sequential revenue decline. CMT
consulting growth was modest.
Products revenue of $1.59 billon was up 15% (16% in local
currency). Within Products, outsourcing was strong on a global
basis, driven by 'notably higher' technology outsourcing work
relative to last year. Strength in Product consulting demand was led
by the retail vertical; this helped offset pockets of weakness in
EMEA.
The Resources operating group posted revenue of $1.29 billion,
up 12% in local currency. Once again, strength was global, driven
by some 'priority' emerging markets. Strength in Resources
outsourcing was driven by flexible, cost-effective sourcing to meet
increased demand from existing operations. Consulting is being
driven by the need for short-term efficiencies.
Financial Services (FS) revenue was up 10% in local currency,
with outsourcing strong as clients focus on cost-takeout and
operating efficiency. Consulting growth was modest, and was led
while declining 4% sequentially. Outsourcing bookings of $3.89
billion were up 22% in dollars. Consulting book-to-bill improved
to 1.07 in 2Q12 from 1.03 in 1Q12. Outsourcing book-to-bill was
1.29 in 2Q12, up from 1.19 in 1Q12. Total book-to-bill rose to
1.17 in 2Q12 from 1.10 in 1Q12 and 1.15 in 2Q11. We note that
by their nature, outsourcing contracts tend to be multiyear and
longer in duration than consulting contracts, which sometimes run
for a year or less. Total contract value is reflected in bookings. On
that basis, consulting book-to-bill will usually lag outsourcing
book-to-bill.
Breaking out bookings by core competency, CEO Craig stated
that bookings in management consulting were strong. Growth was
driven by projects that deliver supply-chain cost savings as well as
those that enable 'large scale business transformation.' Bookings in
Technology consulting were driven by IT rationalization and data
center consolidation. The ongoing drivers in systems integration are
ERP (enterprise resource planning); cloud implementation, software
as a service (SaaS), social networking, enterprise mobility, and
analytics.
In terms of outsourcing, Accenture reported strong demand for
IT outsourcing, which is 'growing everywhere, even in Europe,'
according to the CEO. Companies utilizing Accenture's IT
outsourcing services are seeking to reduce and add higher
variability to their IT costs; virtualization is a key driver. In
business process outsourcing (BPO), Accenture reported strong
bookings in the Americas in particular, and within key verticals
Peer & Industry Analysis
Growth
FICO
P/E
ACN vs.
Market
ACN vs.
Sector
More Value
ADP
20
ACN vs.
Market
ACN vs.
Sector
More Value
More Growth
Price/Book
15
ACN vs.
Market
ACN vs.
Sector
FISV
Value
5
10
15
5-yr
Growth
Rate (%)
20.0
20.0
12.0
7.0
14.0
3.0
12.7
Current
FY P/E
19.8
18.8
16.9
20.0
13.4
22.3
18.5
Net
Margin
(%)
40.0
28.4
8.6
13.0
10.9
13.5
19.1
1-yr EPS
Growth
(%)
16.7
20.0
9.9
10.9
11.7
8.2
12.9
More Value
More Growth
More Value
More Growth
PEG
20
5-yr Growth Rate(%)
Market Cap
Ticker Company
($ in Millions)
V
Visa Inc
62,396
MA
MasterCard Inc
51,448
ACN Accenture PLC
47,429
ADP Automatic Data Processing Inc
26,977
FISV Fiserv Inc
9,599
FICO Fair Isaac Corp
1,563
Peer Average
33,235
More Growth
Price/Sales
V
MA
ACN
P/E
The graphics in this section are designed to
allow investors to compare ACN versus its
industry peers, the broader sector, and the
market as a whole, as defined by the Argus
Universe of Coverage.
• The scatterplot shows how ACN stacks up
versus
its
peers
on
two
key
characteristics: long-term growth and
value. In general, companies in the lower
left-hand corner are more value-oriented,
while those in the upper right-hand corner
are more growth-oriented.
• The table builds on the scatterplot by
displaying more financial information.
• The bar charts on the right take the
analysis two steps further, by broadening
the comparison groups into the sector
level and the market as a whole. This tool
is designed to help investors understand
how ACN might fit into or modify a
diversified portfolio.
Argus
Rating
BUY
BUY
BUY
BUY
BUY
HOLD
ACN vs.
Market
ACN vs.
Sector
5 Year Growth
ACN vs.
Market
ACN vs.
Sector
More Value
More Growth
Debt/Capital
ACN vs.
Market
ACN vs.
Sector
More Value
More Growth
Please see important information about this report on page 6
©2012 Argus Research Company
Argus Analyst Report
NYSE: ACN
ACCENTURE PLC
Report created Mar 26, 2012 Page 4 OF 6
Analyst's Notes...Continued
by insurance worldwide and Asian banks. This helped offset some
weakness in capital markets. Acquisitions contributed to FS
revenue, but also shaved margin. CEO Nanterme promised that FS
margins would tick back up.
Finally, the Health & Public Service (H&PS) operating group
posted 10% annual revenue growth in local currency. Growth once
again reflected 'very significant growth' in healthcare, with a
particular contribution from consulting in North America and
Asia. 'The repositioning of our Public Services business continues
to go well,' according to the CFO. Public Services actually posted
modest year-over-year growth in some regions, including
Asia-Pacific.
CFO Craig concluded her discussion of operating groups by
noting that both bookings and revenue reflect 'continuing strong
and more focused demand across the industries we serve.' We
believe that the H&PS vertical in particular is positioned for strong
growth as government spending recovers and more nations expand
healthcare coverage.
In terms of risks in the picture, in the middle of the quarter
Accenture announced that Kevin Campbell, formerly head of
Technology, had left the company and had been replaced by Marty
Cole. During Accenture's most recent investor day, Kevin Campbell
was highly visible, suggesting that he was positioned as a top
leader. His departure has led to concerns about the potential for
disappointment in IT outsourcing and the technology vertical.
Instead, IT outsourcing and the CMT vertical performed
impressively in the quarter.
We have spoken with Marty Cole in the past and have been
impressed with his vision for the technology business. We think
SVP Cole was instrumental in winning the Symbian business. While
the jury is still out on Symbian, this business was dying on the vine
at Nokia and now looks positioned for revival in the low end of
the smartphone market. In summary, we do not think the
Campbell-to-Cole transition represents significant risk.
Generally, Accenture's outsourcing business is growing faster
than its consulting business. This at least partly represents the
slower rate of growth in Europe. While European consulting trends
are uneven, with pockets of strength alternating with pockets of
weakness, the company also reports that outsourcing growth in
Europe is healthy.
CEO Nanterme stated that Accenture's 'gro wth strategy is
aligned with our clients.' While watching global trends carefully,
the company continues to view the overall macroeconomy as
conducive to further growth in Accenture's markets and businesses.
Most important, according to CEO Nanterme, the market forces
driving the need for large-scale transformation are intact.
EARNINGS & GROWTH ANALYSIS
Accenture reported 2Q12 revenue of $6.80 billion (net of
reimbursements), up 12% year-over-year (13% in local currency)
and down 3.8% sequentially. On a slightly less favorable mix,
reflecting relatively faster growth in outsourcing than in consulting,
GAAP gross margin declined to 31.1% in 2Q12 from 31.8% in
1Q12, and was down slightly from 31.7% in 2Q11. Operating
margin was13.1% in 2Q12, down from 13.9% in 1Q12, but up
from 12.7% a year earlier. Accenture posted earnings of $0.97 per
diluted share in 2Q12, compared to $0.96 per diluted share in
1Q12 and $0.75 in 2Q11.
For all of fiscal 2011, revenue totaled $25.5 billion, up 18.3%
from $21.6 billion in fiscal 2010. Fiscal 2011 EPS totaled $3.40
per diluted share, compared to $2.66 in fiscal 2010.
Management provided fiscal 3Q12 revenue guidance and fiscal
2012 revenue and EPS guidance. The company expects net revenue
of $7.05-$7.25 billion for fiscal 3Q12, which reflects the negative
3% penalty from foreign exchange.
For the full year, management continues to assume a 1%
penalty from foreign exchange. Accenture has increased its full-year
2012 revenue growth forecast to 10%-12% from a prior 7%-10%
(all revenue projections are in local currency). Given year-to-date
top-line growth of almost 14%, Accenture will require just 8%-9%
growth in 2H12 in order to grow 11% (the midpoint of the
guidance range) for the full year.
CFO Craig noted that Accenture is forecasting operating margin
of 13.7%-13.9% for FY12, up 10-30 basis points from fiscal 2011.
Based on the higher revenue outlook, Accenture now projects
full-year 2012 earnings of $3.82-3.90 per diluted share, up from a
prior forecast of $3.76-3.84 per diluted share offered in December
2011.
We are maintaining our FY12 earnings estimate of $3.85 per
diluted share, as the slightly more favorable outlook is muted by
higher tax assumptions in 2H12. We have trimmed our preliminary
forecast for fiscal 2013 to $4.23 per diluted share from an earlier
$4.27 (our initial forecast was $4.23). Our more conservative
outlook for FY13 is predicated on expectations that outsourcing
will continue to grow faster than consulting. Our long-term EPS
growth rate forecast is an annualized 12%.
FINANCIAL STRENGTH & DIVIDEND
We rate Accenture's financial strength as Medium-High. The
company, though not debt-free, has just $5.9 million in debt.
Cash and equivalents totaled $5.6 billion at the end of 2Q12,
up from $5.14 billion at the end of 1Q12. Cash was $5.7 billion at
the end of fiscal 2011. The decline in cash from 4Q11 to 1Q12
reflected payment of the semiannual dividend ($475 million) as
well as cash paid to repurchase shares. Cash was $4.8 billion at the
close of fiscal 2010.
Cash flow from operations was $1.33 billion in 1H12, up from
$707 million in the first half of fiscal 2011. Management projects
cash flow from operations of $3.65-$3.95 billion for all of fiscal
2012, along with capital expenditures of about $450 million.
Accenture intends to return $3 billion to shareholders during
2012, while reducing weighted-average shares by 2%. During
2Q12, Accenture repurchased 8.6 million shares for $460 million.
As of 2Q12, $5.5 billion remained in the repurchase authorization.
Accenture pays a semiannual dividend of $0.675 per common
share. The semiannual dividend is scheduled to be paid on May 15,
2012. The dividend provides a yield of about 2.1% at current
prices.
MANAGEMENT & RISKS
The CEO of Accenture is Pierre Nanterme, a 28-year veteran of
Accenture. He succeeded William D. Green, a 32-year veteran of
the company who is now chairman of the board. Pamela Craig,
another 20-year-plus veteran, is CFO. Other key executives include
Marty Cole, Group CEO of Technology; Mike Salvino, Group
CEO of Business Process Outsourcing; and Sander van't
Noordende, Group CEO of Management Consulting.
Risks to investing in Accenture include cyclicality in the
consulting business, which dropped sharply during the recession.
The company also has substantial exposure to Europe, which has
Please see important information about this report on page 6
©2012 Argus Research Company
Argus Analyst Report
NYSE: ACN
ACCENTURE PLC
Report created Mar 26, 2012 Page 5 OF 6
Analyst's Notes...Continued
been roiled by sovereign debt problems, and to the public sector,
which has downsized in response to reduced tax receipts.
Management reports that its European customers are generally
stable. Accenture also expects government purchases of consulting
services to be stable to higher in the coming quarters, as agencies
invest in technology to keep costs low.
The company's strength in outsourcing, which generates more
consistent revenue, helps to temper this volatility. Accenture's five
operating groups also provide diversification during periods of
weakness for any particular industry.
With low barriers to entry, the consulting business can be quite
competitive. IBM is a leading competitor. Hewlett-Packard's
acquisition of EDS positions that company in IT outsourcing and
consulting. McKinsey remains an industry force in consulting,
while India-based firms such as Infosys compete in IT outsourcing.
Accenture's assets are people, and it is engaged in a high
personnel-turnover business. Total headcount at the end of 2Q12
was 246,000. Attrition (excluding involuntary terminations) in the
latest quarter was 12%. Accenture plans to add about 60,000
employees in FY12.
five-year average P/E of 14.9. Although the shares are trading
above the five-year average on P/E, Accenture is more attractively
valued on other measures of historical comparable valuation. Given
the strong cash flow generation and revenue and bookings
momentum, our two- and three-stage discounted free cash flow
models produce a value well in excess of current prices. Our
calculated blended value for Accenture, which includes our
proprietary peer derived value measure, is in the high $70s and has
been rising steadily. Appreciation to our 12-month target price of
$74 (raised from $66), along with the 2.1% dividend yield, implies
a risk-adjusted total return exceeding 15%, in excess of our
forecast for the broad market.
On March 23, BUY-rated ACN closed at $64.88, up $1.36.
COMPANY DESCRIPTION
COMPANY DESCRIPTION
Based in Dublin, Ireland, Accenture is a global management
consulting, technology services and outsourcing company. The two
main lines of business are consulting and outsourcing. The
company is also organized along five key verticals served, including
Communications, Media & Technology; Financial Services;
Products; Health & Public Service; and Resources. In fiscal 2011,
approximately 44% of revenue was generated in the United States.
INDUSTRY
Our rating on the Technology sector is Over-Weight.
Technology lagged the broad market in 2010 and again in 2011.
Although technology has led the market early in 2012, sector
valuations remain attractive, while growth prospects remain highly
positive. For the long term, we expect the sector to increase its
weighting within the S&P 500 from the current 19%-20% level to
somewhere near 25%, based on positive company and sector
fundamentals. For individual companies, these include high cash
levels, low debt, and broad international business exposure. We
expect the entire sector to benefit from the transformative effects
generated by new developments in technology.
Positives in the picture for information processing & computing
companies include a second-stage PC and enterprise IT 'refresh'
cycle that is being driven by the pending Microsoft Windows 8
launch and Intel's 'Ivy Bridge' family of PC (second-generation
Core i) and server (Romley) processors. Server and Storage
providers stand to benefit from the battle among computing and
communications companies for dominance in the enterprise data
center, where virtualization and cloud enablement are prompting
market-share disruption.
Communications infrastructure players stand to gain from the
explosion in network traffic related to the rise of social networking
sites, high-bandwidth video on the network, and mobile data. No
single trend may be as transformative as the acceleration in mobile
broadband, driven by tablets and smartphones.
VALUATION
ACN shares currently trade at 16.7-times our fiscal 2012
forecast and at 15.2-times our fiscal 2013 projection, above the
Please see important information about this report on page 6
©2012 Argus Research Company
Argus Analyst Report
NYSE: ACN
METHODOLOGY & DISCLAIMERS
Report created Mar 26, 2012 Page 6 OF 6
About Argus
Argus Research, founded by Economist Harold Dorsey in 1934,
has built a top-down, fundamental system that is used by Argus
analysts. This six-point system includes Industry Analysis, Growth
Analysis, Financial Strength Analysis, Management Assessment,
Risk Analysis and Valuation Analysis.
Utilizing forecasts from Argus’ Economist, the Industry Analysis
identifies industries expected to perform well over the next
one-to-two years.
The Growth Analysis generates proprietary estimates for
companies under coverage.
In the Financial Strength Analysis, analysts study ratios to
understand profitability, liquidity and capital structure.
During the Management Assessment, analysts meet with and
familiarize themselves with the processes of corporate management
teams.
Quantitative trends and qualitative threats are assessed under
the Risk Analysis.
And finally, Argus’ Valuation Analysis model integrates a
historical ratio matrix, discounted cash flow modeling, and peer
comparison.
THE ARGUS RESEARCH RATING SYSTEM
Argus uses three ratings for stocks: BUY, HOLD, and SELL.
Stocks are rated relative to a benchmark, the S&P 500.
• A BUY-rated stock is expected to outperform the S&P 500 on
a risk-adjusted basis over a 12-month period. To make this
determination, Argus Analysts set target prices, use beta as the
measure of risk, and compare expected risk-adjusted stock
returns to the S&P 500 forecasts set by the Argus Market
Strategist.
• A HOLD-rated stock is expected to perform in line with the
S&P 500.
• A SELL-rated stock is expected to underperform the S&P 500.
Argus Research Disclaimer
Argus Research is an independent investment research provider and is not a member of the FINRA or the SIPC. Argus Research is not a registered broker dealer and does not have
investment banking operations. The Argus trademark, service mark and logo are the intellectual property of Argus Group Inc. The information contained in this research report is
produced and copyrighted by Argus, and any unauthorized use, duplication, redistribution or disclosure is prohibited by law and can result in prosecution. The content of this report
may be derived from Argus research reports, notes, or analyses. The opinions and information contained herein have been obtained or derived from sources believed to be reliable,
but Argus makes no representation as to their timeliness, accuracy or completeness or for their fitness for any particular purpose. This report is not an offer to sell or a solicitation of
an offer to buy any security. The information and material presented in this report are for general information only and do not specifically address individual investment objectives,
financial situations or the particular needs of any specific person who may receive this report. Investing in any security or investment strategies discussed may not be suitable for
you and it is recommended that you consult an independent investment advisor. Nothing in this report constitutes individual investment, legal or tax advice. Argus may issue or may
have issued other reports that are inconsistent with or may reach different conclusions than those represented in this report, and all opinions are reflective of judgments made on the
original date of publication. Argus is under no obligation to ensure that other reports are brought to the attention of any recipient of this report. Argus shall accept no liability for any
loss arising from the use of this report, nor shall Argus treat all recipients of this report as customers simply by virtue of their receipt of this material. Investments involve risk and an
investor may incur either profits or losses. Past performance should not be taken as an indication or guarantee of future performance. Argus has provided independent research
since 1934. Argus officers, employees, agents and/or affiliates may have positions in stocks discussed in this report. No Argus officers, employees, agents and/or affiliates may
serve as officers or directors of covered companies, or may own more than one percent of a covered company’s stock.
Morningstar Disclaimer
© 2012 Morningstar, Inc. All Rights Reserved. Certain financial information included in this report: (1) is proprietary to Morningstar and/or its content providers; (2) may not be
copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising
from any use of this information. Past performance is no guarantee of future results.
©2012 Argus Research Company
Argus Analyst Report