Options Trade – Accenture PLC (ACN) Calls
Monday, March 25, 2013

”Who Says You Can’t Be Big And Nimble?” – “Who Says We Can’t Profit From ACN?”

**OPTION TRADE: Buy the ACN Aug 2013 75.000 call (ACN130817C00075000) at or under $2.90, good for the day. Place a protective stop limit at $1.20 and a pre-determined sell at $5.50.

by Ian Harvey

March 25, 2013

Introduction

Dublin-based Accenture PLC (NYSE: ACN) will report its fiscal second-quarter results after the market close on March 28. Going into the announcement, analysts expect Accenture will report earnings of $0.97 per share, which would be in-line with the same period last year. The stock has been moving higher since July, and has managed to gain 15% since the start of the year.

About Accenture

Accenture plc (Accenture) is engaged in providing management consulting, technology and outsourcing services. It is one of the world's largest consulting firms measured by revenues and is a constituent of the Fortune Global 500 list. As of September 2012, the company had more than 257,000 employees across 120 countries, with India currently being the largest employee base for Accenture, with the headcount over nearly 80,000. Since September 1, 2009 the company has been incorporated in Ireland.

The Company’s business is structured around five operating groups, which together consists of 19 industry groups serving clients in industries globally. The Company’s segment includes Communications, Media & Technology, Financial Services, Health & Public Service, Products and Resources.

Company Acquisitions:-

In November 2011, ACN acquired Zenta, a provider of residential and commercial mortgage processing services in the United States.

In April 2012, it acquired Neo Metrics Analytics S.L a consulting firm specializing in optimization and predictive analytics based in Madrid, Spain.

On August 2, 2012, the Company acquired Octagon Research Solutions, Inc. In October 2012, it acquired the software and skills of Nokia Siemens Networks Internet Protocol television (IPTV) business.

In October 2012, the Company acquired avVenta Worldwide.

Key Statistics for ACN

Current P/E Ratio (ttm) 18.7513
Estimated P/E(08/2013) 17.2415
Relative P/E vs. SPX 1.2218
Earnings Per Share (USD) (ttm) 3.9400
Est. EPS (USD) (08/2013) 4.2850
Est. PEG Ratio 1.3995
Market Cap (M USD) 51,446.57
Shares Outstanding (M) 644.33
30 Day Average Volume 2,432,554
Price/Book (mrq) 11.1700
Price/Sale (ttm) 1.5885
Dividend Indicated Gross Yield 2.19%
Cash Dividend (USD) 0.8100
Last Dividend 10/10/2012
5 Year Dividend Growth 28.73%
Next Earnings Announcement 03/28/2013

The Fundamentals

Fundamentally, Accenture is very solid. The company has no debt, and has had tremendous growth in just the last year - going from 27.3 billion in 2011 to 29.7 billion in 2012. The return on equity (63.10%), return on assets (18.17%) and return on invested capital (37.87%) are in the 95th percentile of the business services industry. ACN's goal is to make incremental improvements in operating margins, and it has been successful in doing so over the past few years.

Technical Analysis

The 50 and 200 day moving averages are rising, indicating a bullish trend. The relative strength index and Moving Average Convergence Divergence (MACD) also point towards a bullish trend for Accenture.

ACN was recently trading at $76.49, down $1.97 from its 12-month high and $21.55 above its 12-month low. Last Friday, ACN settled at $73.88. Technical indicators for ACN are bullish and the stock is in an upward trend. The stock has recently seen support above $74 and resistance below $78.

Earnings Expectations

Second-quarter fiscal 2013 earnings from Accenture are expected to come to $0.97 per share, on revenues of $7.07 billion. In the same quarter of the previous year, the management consulting, technology services and outsourcing company exceeded consensus earnings per share (EPS) estimates when it posted $0.97 per share and $6.80 billion in revenue.

The consensus EPS estimate for the second quarter has not changed in the past 60 days. And Accenture has not fallen short of earnings expectations in the past eight quarters. The company is scheduled to share its results Thursday after the markets close.

Analyst Ratings and Estimates

Of the 22 analysts who cover the stock 10 rate it a "strong buy", four rates it a "buy" and eight rate it a "hold".

Thomson Reuters, SmartConsensus and MarketEdge all rate Accenture as a solid buy with current conditions and an expected strong earnings report. Analyst also expect a significant jump in earnings per share for 2013; going from $3.84/share in 2012 to an estimated $4.26/share in 2013. Accenture is believed to start bringing in more long-term deals, which will be much more profitable and, as importantly, more predictable. Revenue growth is expected to be around 5.5%, with a slight currency headwind.

Stifel Nicolaus reiterated their buy rating on shares of Accenture in a research report sent to investors on Wednesday morning last week. The firm currently has an $80.00 price target on the stock, up from their previous price target of $79.00.

“In sum, we expect solid fundamentals with growth accelerating in the back half of the year consistent with previous guidance. There are several factors driving improving fundamentals and accelerating growth including easing comparisons, double digit growth in consulting bookings over the past 24 months which are beginning to convert to revenue, the re-emergence of smaller quick turn projects in the pipeline last quarter and stable economic fundamentals.,” the firm’s analyst wrote.

A number of other analysts have also recently weighed in on ACN. Analysts at Susquehanna set an $88.00 price target on shares of Accenture Plc in a research note to investors on Wednesday. They now have a positive rating on the stock. Separately, analysts at Jefferies Group raised their price target on shares of Accenture Plc from $66.00 to $73.00 in a research note to investors on Monday. They now have a hold rating on the stock. Finally, analysts at TheStreet reiterated a buy rating on shares of Accenture Plc in a research note to investors on Monday.

Analyst Firms Making Recommendations

ARGUS RESEARCH ATLANTIC EQUITI
B OF A M L BAIRD R W
BARCLAYS CAPITA BB & T CAPITAL
BMO CAPITAL MKT CO FORECST
COWEN & COMPANY CREDIT AGRICOLE
DEUTSCHE BK SEC EDWARD JONES
GOLDMAN SACHS J.P. MORGAN
JANNEY MONT. JEFFERIES & CO.
MORGAN STANLEY RAYMOND JAMES
SOCIETE GENERAL STIFEL NICOLAUS
SUSQUEHANNA WELLS FARGO SEC

Conclusion

Accenture has a solid history of posting in-line or better than expected quarterly earnings, and there is little reason to believe this quarter will be any different. Over the last eight quarters, the company has beaten analyst estimates seven times, and matched once. If the company is able to post better-than-expected numbers again this quarter, the stock should continue to trade to the upside.

The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with no debt, solid stock price performance, growth in earnings per share and increase in net income. These characteristics make ACN an appealing options trade.

Therefore, based on the facts above the following options trade is recommended…..


**OPTION TRADE: Buy the ACN Aug 2013 75.000 call (ACN130817C00075000) at or under $2.90, good for the day. Place a protective stop limit at $1.20 and a pre-determined sell at $5.50.



”Success is simple. Do what's right, the right way, at the right time.”


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Options traders are not successful because they win.
Options traders win because they are successful.



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