Majority of Indian IT stocks touched new 52-week high on September 27, after tech giant Accenture reported its Q4 financial performance. Broadly, Accenture's guidance and demand commentary comes as a positive news for Indian IT companies which was struggling with slowed discretionary spending and uncertain macro conditions since FY24 to Q1FY25. The latest outlook by Accenture signals that downside risk in the tech sector has been reduced.
IT Stocks On September 27:
HCL Tech touched a new 52-week high of Rs 1,828.55 apiece, while Coforge touched a new high of Rs 7,149 apiece. Persistent Systems also hit its new 1-year high of Rs 5,585.95 apiece.
These IT stocks are also among the top dividend-paying giants. In FY24, HCL Tech paid up to a 2,600% dividend worth Rs 52 per share, while Coforge delivered dividends of 760% valuing Rs 76 per share. Persistent paid up to 520% dividend worth Rs 26 per share in the said fiscal.
Other stocks like Mphasis, Infosys, TCS, Tech Mahindra, Wipro, LTIMindtree, and LTTS also neared their 52-week high levels.
Accenture Earnings:
In the fourth quarter, Accenture posted revenue of f $16.4 billion, an increase of 3% in U.S. dollars and 5% in local currency. GAAP operating margin stood at 14.3%, an increase of 230 basis points, while the adjusted operating margin expanded by 10 bps to 15%.
Further, GAAP operating income was $2.35 billion, compared to $1.91 billion for the fourth quarter of fiscal 2023. Also, Adjusted operating income was $2.46 billion compared to $2.38 billion for the fourth quarter of fiscal 2023.
By the end of Q4, Accenture's new bookings were at $20.1 billion.
For the full year, revenues were at $64.9 billion, an increase of 1% in U.S. dollars and 2% in local currency compared with fiscal 2023. GAAP operating income was $9.60 billion, compared to $8.81 billion in fiscal 2023, and operating margin was 14.8%, compared to 13.7% in fiscal 2023.
Accenture Guidance:
For the first quarter of 2025, the Ireland-headquartered IT giant expects revenue to be in the range of $16.85 billion to $17.45 billion or an increase of 2% to 6% in local currency, reflecting the company's assumption of an approximately positive 1.5% foreign-exchange impact compared with the first quarter of fiscal 2024.
For the entire fiscal year 2025, the global multinational professional services company expects revenue growth to be in the range of 3% to 6% in local currency. While the GAAP operating margin is expected to be in the range of 15.6% to 15.8%, an expansion of 80 to 100 basis points from the fiscal 2024 GAAP operating margin, and an expansion of 10 to 30 basis points from the fiscal 2024 adjusted operating margin, which excluded $438 million for business optimization costs.
Julie Sweet, chair and CEO, of Accenture, said, "We continue to accelerate our leadership in Generative AI, which we believe is the most transformative technology of the next decade, delivering $3 billion in new bookings for the year. Our successful strategy to lead reinvention for clients and continued investments in our business have positioned Accenture for strong growth in fiscal 2025."
What does Accenture's earnings mean for Indian IT companies?
Brokerage Motilal Oswal believes the guidance, deal bookings, and overall commentary have turned the corner, which bodes well for the sector.
Motilal believes there are signs of return of modernization and discretionary spending going forward, albeit in some pockets.
In its note, Motilal said, "While the slope of recovery, and how broad-based the recovery would be is still up for debate, the ACN guidance and the ensuing outlook reduce the downside risk to our growth estimates. We are not too concerned about variance in revenue growth for Indian IT services companies in the upcoming quarter, and believe it should not lead to a meaningful change in estimates, sentiments, or valuations (short-term gyrations aside)."
Moreover, the brokerage believes that the most important catalyst for the sector would emerge after 3QFY25 when client budgets for CY25 would be finalized and the magnitude of change in client behaviour would become clearer.
However, notably, Accenture believes the key challenge would be the implementation of GenAI which will require clients to be prepared with data infrastructure, but a boosting factor the artificial intelligence. In Q4, Accenture's Generative AI new bookings came in at $1 billion for the quarter and $3 billion for the full year.
In Motilal's view, the implications of Gen AI will become more pronounced and clients' conversations are changing from POCs to a material rollout and integration of AI into their core operations. Further, the company expects GenAI bookings to accelerate in FY25.
Which IT Stocks To BUY/SELL After Accenture Earning?
Motilal Oswal's recommendations on IT stocks are the following:
- Cyient: BUY For Rs 2300 Target Price
- HCL Tech: BUY For Rs 2200 Target Price
- Infosys: BUY For Rs 2200 Target Price
- LTIMindtree: BUY For Rs 7400 Target Price
- L&T Technology: BUY For Rs 6600 Target Price
- Mphasis: Neutral For Rs 3000 Target Price
- Coforge: BUY For Rs 8,100 Target Price
- Persistent Systems: BUY For Rs 6300 Target Price
- TCS: BUY For Rs 5400 Target Price
- Tech Mahindra: Neutral For Rs 1600 Target Price
- Wipro: Neutral For Rs 500 Target Price
- Zensar Tech: BUY For Rs 760 Target Price
Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.
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