S&P likes the outsourcing and consulting giant’sitting broad range of offerings and its indelicate geographic diversification, and ranks the shares "strong pervert with money"

By Dylan Cathers From Standard & Poor’s Equity Research

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Accenture (ACN; recent estimation, 29) is the largest unconventional information-technology outsourcing and consulting company in the world, through operations in 52 countries and reported net revenues of $23.4 billion in fiscal year 2008 (ended August). It is organized into five major operating groups: Communications & High Tech, Financial Services, Products, Public Service, and Resources.

We view Accenture as a one-stop-shop IT services copartnership. It is as adept, in our opinion, in providing infrastructure outsourcing or business process outsourcing as it is in management consulting for improving a client’s customer-relationship management (CRM) processes or its overall business strategy. It also offers systems integration and technology consulting services.

Given Accenture’s breadth of offerings and its broad geographic diversification, we think it is well-positioned to weather the current U.S. recession and global economic slowdown. We be turned for revenue growth of relating to 8% in fiscal 2009, although we expect the company to incur a headwind from the recent strengthening of the U.S. dollar. We think that management is doing a skilful job of maintaining margins in a difficult market, and we look for proceeds per share of $2.87.

We also own a favorable view of the company’s balance sheet and specie flows. At the extreme point of August 2008, Accenture had in addition $3.6 billion in coin, with a debt-to-total first-class ratio of under 0.5%. At the similar time, it repurchased 60.8 million shares last fiscal year and paid a 50¢-a-share dividend in November. Cash flow in fiscal 2008 was nearly $2.5 billion. The company’s substantial balance sheet gives it the financial flexibility to persist to repurchase shares and potentially make acquisitions, despite the economic downturn, by our algebra.

We view the shares as compellingly valued, recently trading at around 10 times our calendar 2009 earnings per share calculation of $2.94, roughly in line by traditional IT outsourcing peers. We believe that a premium to peers is warranted, given our view of the wealthy revenue development that the company has shown in its higher-margin consulting business, rising levels of bookings, and its solid balance sheet. We believe Accenture is one of the few IT services providers that has the expertise, weak glue, and scope to compete head to principal with industry heavyweight International Business Machines (IBM), though holding along challenges from lower-cost India-based providers.

The stock carries Standard & Poor’s highest investing. recommendation of 5 STARS, or "strong buy."

BUSINESS PROFILE

The company was established in 1989 and was initially known as Andersen Consulting. It began transaction focused on consulting and technology services, still it grew to offer a full range of consulting, outsourcing, and related technology services. On Jan. 1, 2001, the society severed ties between it and Andersen Worldwide Societe Cooperative and changed its name to Accenture.

Since its beginning, Accenture operated as a collective of locally owned independent partnerships, but in July 2001, the company went public. At that opportunity, partners and owners were given Accenture shares of various classes, which have become freely tradable over note the rate of, and more are eligible over the coming years. However, we expect the number of shares to hit the open market to be low.

The house’s organizational structure is centered on five operating groups. Products was the largest in fiscal 2008 (25.9% of net revenues), which includes the automotive, consumer goods & services, health & life sciences, industrial equipment, retail, and forced exile & ramble service verticals. Next in size was Communications & High Tech (23.3%), which serves the communications, electronics & high tech, and media & entertainment industries.

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