Although the technology sector faced challenges like rising inflation and large-scale layoffs, it has shown resilience and adaptability in overcoming market obstacles. This is primarily because of the sector's constant innovation in its product and service offerings and the ongoing digital transformation of various industries.
As a result, the time looks ripe to adopt a bullish stance towards quality tech stocks Accenture plc (ACN), Gartner, Inc. (IT), and The Hackett Group, Inc. (HCKT) and examine their fundamentals to see if they are worth buying this month.
Despite inflation taking a bite out of households and businesses, the technology sector remains strong. As per Gartner's recent forecast, global IT spending is projected to total $4.6 trillion in 2023, indicating an increase of 5.5% from 2022.
Considering the increasingly expanding tech landscape, several companies are opting to outsource business processes to gain a competitive advantage by reducing operating costs, enabling staffing flexibility, and saving time. IT outsourcing spending is predicted to be $519 billion in 2023, reflecting a 22% increase over 2019.
Furthermore, the emerging trends of Artificial Intelligence (AI), Machine Learning (ML), automation, blockchain, the Internet of Things (IoT), and the new norm of hybrid work culture are prompting the outsourcing market’s growth. The global IT outsourcing revenue is expected to reach $587.30 billion by 2027, growing at a CAGR of 8.1%.
Moreover, with the growing demand for tech skills, connectivity, and digitization, the overall outlook of the technology sector remains positive. With that being said, let’s look at the stocks in detail.
Accenture plc (ACN)
Based in Dublin, Ireland, ACN is a global professional services company engaged in providing a range of services in strategy and consulting, technology, operations, and Accenture song. It offers application services, automation, business process outsourcing, cloud, data and analytics, finance consulting, infrastructure, marketing, etc.
On May 9, ACN collaborated with Microsoft Corporation (MSFT) to transform its supply chain management using Microsoft Azure cloud services. The collaboration between the companies in implementing the solution could serve as a model for other industries looking to undergo data-led transformation.
The Azure platform, combined with ACN's expertise, has enabled the development of an innovative solution to improve supply chain management.
On May 9, ACN announced the acquisition of Objectivity, a digital engineering firm that specializes in cloud and platform development services, which assist clients in accelerating their transformation journey for rapid innovation.
This acquisition enables the company to enhance its Cloud First capabilities, allowing clients to leverage more flexible and adaptable platform models and services for faster digital transformation.
On April 24, ACN and Google Cloud expanded their partnership to accelerate cybersecurity resilience. The collaboration combines ACN's expertise in cybersecurity consulting, managed security services, and digital transformation with Google Cloud's security solutions and expertise.
The partnership is part of a broader effort by these companies to help organizations build more secure and resilient digital infrastructures that can adapt to the evolving threat landscape.
For the six-month period that ended February 28, 2023, ACN’s revenue increased 5.1% year-over-year to $31.56 billion. Its operating income grew marginally from the year-ago value to $4.54 billion. The company’s attributable net income and EPS amounted to $3.49 billion and $5.47, representing an increase of 1.8% and 2.8% from the prior-year period, respectively.
The consensus EPS estimate of $2.98 for the third quarter (ending May 30, 2023) represents a 2.9% improvement year-over-year. The consensus revenue estimate of $16.48 billion for the current quarter represents a 2% increase from the same period last year.
The company has an excellent earnings surprise history, as it surpassed the consensus EPS estimates in three of the trailing four quarters. The stock has gained marginally year-to-date to close the last trading session at $268.89.
ACN’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Quality and a B for Stability and Sentiment. In the 9-stock A-rated Outsourcing - Tech Services industry, it is ranked #3. To see additional POWR Ratings of ACN for Growth, Value, and Momentum, click here.
Gartner, Inc. (IT)
IT operates as a research and advisory company through its three broad segments: Research; Conferences; and Consulting. The company offers subscription services, including on-demand access to published research content, market research, custom analysis, and on-the-ground support services.
IT’s total revenues increased 11.6% year-over-year to $1.41 billion in the first quarter (ended March 31, 2023), while its operating income rose 87.8% from the year-ago value to $408 million.
The company’s adjusted net income grew 19.7% and 23.6% from the prior-year quarter to $231 million and $2.88 per share, respectively. Also, its adjusted EBITDA increased 15.2% from the year-ago value to $379 million.
Analysts expect IT’s revenue to increase 7.3% year-over-year to $1.48 billion for the second quarter (ending June 2023), while its EPS is expected to be $2.50 in the same period.
Its EPS is expected to increase by 4.6% per annum in the next five years. Moreover, it topped the revenue and EPS estimates in each of the trailing four quarters, which is promising.
IT’s shares have gained 23.8% over the past year to close the last trading session at $304.52
IT’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has an A grade for Quality and a B for Sentiment. Within the same A-rated industry, it is ranked #2. Click here to see the other ratings of IT for Growth, Value, Momentum, and Stability.
The Hackett Group, Inc. (HCKT)
HCKT operates as a strategic advisory and technology consulting firm primarily in the United States, Europe, and internationally. The company carries out its operations through three segments: Global Strategy & Business Transformation; Oracle Solutions; and SAP Solutions.
On May 2, Answerthink, a subsidiary of HCKT, entered into an agreement with Nagarro to sell and support its ComplianceNOW suite to U.S. companies using SAP software. ComplianceNOW is a cloud-based compliance software suite that helps make SAP compliance more manageable and transparent.
Michael Eidmann, a principal at Answerthink, stated that their commitment is to provide compliance products that are certified by SAP while ensuring they are easy to use, cost-effective, quickly implemented, and have low overall ownership costs.
On April 13, HCKT’s announced the launch of a new research project within its Market Intelligence Service, which aims to assess and rank finance and accounting outsourcing solutions providers.
The evaluation will consider factors such as control & risk management and financial planning & analysis capabilities, finance operations and analysis, customer to cash, general accounting, consolidation, and regulatory reporting.
The aim of this project is to provide organizations with valuable insights and guidance when selecting a finance and accounting outsourcing provider.
HCKT’s total revenue stood at $71.23 million in the first quarter that ended on March 31, 2023. The company’s total cost and operating expenses declined 3.7% from the year-ago value to $59.98 million, while its adjusted net income amounted to $9.96 million and $0.37 per share, respectively, for the same period.
Street expects HCKT’s revenue and EPS for the third quarter (ending September 2023) to increase 4.4% and 11.7% year-over-year to be $75.18 million and $0.41, respectively. Moreover, it surpassed the EPS estimates in each of its trailing four quarters, which is excellent.
The stock has lost marginally over the past five days to close the last trading session at $18.34.
It’s no surprise that HCKT has an overall rating of B, which equates to Buy in our proprietary rating system. It has an A grade for Quality. Out of nine stocks in the same industry, it is ranked first.
In addition to the POWR Ratings we stated above, we also have HCKT’s ratings for Growth, Value, Momentum, Stability, and Sentiment. Get all HCKT ratings here.
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ACN shares were trading at $270.98 per share on Thursday afternoon, up $2.09 (+0.78%). Year-to-date, ACN has gained 2.37%, versus a 7.96% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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