US Open: US100 gains 1%. Accenture shares plunge 10% to 9-month low after earnings

• Wall Street indices rise; US500 gains nearly 0.9% – Meta Platforms (META.US) leads among Big Tech
• U.S. economic data exceeds expectations; jobless claims remain low at 223K, while the Philadelphia Fed regional index comes in above forecasts.
• Accenture (ACN.US) shares drop nearly 10% following earnings; solid results, but Wall Street sees margin erosion.

Despite pre-market declines, Wall Street sentiment remains optimistic today. The U.S. stock market extends its upward momentum, fueled by yesterday’s Fed comments, where it announced plans to scale back its QT program starting in April and signaled two rate cuts this year, totaling 50 basis points. Big Tech stocks are trading mixed today; Microsoft, Alphabet, and Apple are down, while Meta Platforms and Nvidia post slight gains. The IT services sector is under pressure, with IBM and Accenture leading the declines.

US100 (M15 interval)

Buying volume is picking up again, pushing the Nasdaq 100 futures contract back above 19,900 points.

Source: xStation5

Company News

• Cava Group (CAVA.US) soars over 5.5% after JPMorgan upgraded the Mediterranean restaurant chain to “overweight,” recommending investors take advantage of the stock’s pullback.
• Celldex Therapeutics (CLDX.US) gains 2% after Morgan Stanley initiated coverage of the drug developer with an “overweight” rating, citing the company’s compelling approach to treating various inflammatory conditions.
• Coty (COTY.US) rises 3% after Citi upgraded the cosmetics company to “buy,” stating that weakness in its consumer beauty segment and normalization in its prestige division are already largely reflected in the stock.
• Five Below (FIVE.US) jumps 8% after the discount retailer reported fourth-quarter results that exceeded analyst expectations.
• Geo (GEO.US) climbs about 2% after the company signed a contract with U.S. Immigration and Customs Enforcement (ICE) to immediately activate a federal immigration processing center at its 1,800-bed North Lake Facility in Baldwin, Michigan.
• Jabil (JBL.US) surges 7% after the manufacturing services firm raised its full-year guidance.
• PDD (PDD.US) ADRs gain over 2% despite the Chinese e-commerce platform (Temu) reporting results that missed estimates for the third consecutive quarter, indicating further growth slowdown amid competitive pressure and uncertainty regarding tariffs’ impact on global expansion

Accenture (ACN.US) Under Pressure Following Earnings

IT consulting giant Accenture delivered mixed full-year guidance, raising investor uncertainty, especially given its current valuation. However, the report highlighted that Accenture is navigating the slowdown better than its competitors. Additionally, the upward revision of its revenue forecast came as a positive surprise, which could be attributed to the company’s strength relative to peers, who have been hit by weaker government spending and discretionary IT budget cuts.

TD Cowen analysts noted that while Accenture’s earnings and revenue results were better than feared, margins weakened, and new bookings came in below expectations.

Full-Year Forecast

• Expected EPS: $12.55 – $12.79 (previously: $12.43 – $12.79), Wall Street estimate: $12.74
• Expected revenue growth: +5% to +7% (previously: +4% to +7%)
• Expected operating margin: 15.6% – 15.7% (previously: 15.6% – 15.8%)
• Expected operating cash flow: $9.4 billion – $10.1 billion, estimate: $10.03 billion
• Expected free cash flow (FCF): $8.8 billion – $9.5 billion
• Expected revenue: $16.9 billion – $17.5 billion, estimate: $17.22 billion
• Expected revenue growth: +3% to +7%

Second-Quarter Results

• EPS: $2.82 vs. $2.63 y/y, estimate: $2.81
• Revenue: $16.66 billion, +5.4% y/y, estimate: $16.6 billion

Revenue by Segment:

• Communications, Media & Technology: $2.73 billion, +2.8% y/y, estimate: $2.69 billion
• Financial Services: $3.01 billion, +7.2% y/y, estimate: $2.89 billion
• Products: $5.05 billion, +6.1% y/y, estimate: $5.08 billion
• Health & Public Services: $3.61 billion, +8.2% y/y, estimate: $3.62 billion
• Resources: $2.26 billion, +0.8% y/y, estimate: $2.3 billion

Bookings & Margins

• New generative AI bookings: $1.4 billion
• Total bookings: $20.9 billion, -3.2% y/y, estimate: $21.69 billion
• New consulting bookings: $10.47 billion, -0.5% y/y, estimate: $10.48 billion
• New managed services bookings: $10.44 billion, -5.6% y/y, estimate: $11.27 billion

Margins & Cash Flows:

• Gross margin: 29.9% vs. 30.9% y/y, estimate: 31.2%
• Free cash flow (FCF): $2.68 billion, +35% y/y
• Operating cash flow: $2.85 billion, +36% y/y, estimate: $2.73 billion

Accenture (ACN.US) Stock Performance

Accenture shares are down nearly 10% today, testing levels not seen since spring 2024. Looking at the latest downward move, its magnitude is almost identical to the selloff that occurred between February and June 2024.

Source: xStation5