Because Infosys, TCS shares hit new highs after Accenture’s results

Shares of Indian IT services firms, Tata Consultancy Services Ltd (TCS) and Infosys Ltd hit a new week of 52 on the NSE on Friday. Not without reason. Accenture Plc announced its first quarter earnings for the financial year 2021 (end of August) and they are not bad. Furthermore, the management’s comments are also reassuring. Large Indian IT companies tend to mirror Accenture’s performance with some lag.

After the results, Accenture’s shares were up about 7% in the US on Thursday. The company revised its revenue growth guide for FY21 upward to 4-6% from the 2-5% indicated at the time of its fourth quarter 2020 results announcement.

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As analysts at Jefferies India Pvt. Ltd points out, “Accenture’s Q1FY21 results reflect accelerated spending on cloud, security and digital transformation, which are key drivers of medium-term growth.” the expectations of a resumption of growth from H2FY21 are quite in line with our expectations for Indian top tier IT companies “.

In addition, Accenture’s new bookings for the three months ending November increased 25% year-on-year to $ 12.9 billion. This was primarily driven by the outsourcing of order bookings, which increased by up to 47% year-on-year to $ 6.3 billion. This bodes well for the demand from major Indian IT companies.

“The outsourced backlog / invoice ratio continues to grow past historical levels at 1.2x for the second consecutive quarter and this should also be reflected in strong order bookings for Indian technicians, in our view,” analysts said. by JM Financial Institutional Securities Ltd in a report dated 17 December.

Accenture’s first quarter revenue growth of 2% year-over-year in constant currency terms was far above the driven range of -3% to 0%. Analysts point out that the recovery in revenues has been large. Accenture said local currency revenue growth was solid in North America and modest in growth markets, partially offset by a slight decline in Europe.

Overall, Accenture’s results indicate that demand outlook remains solid and there is acceleration in cloud adoption. Remember that in a recent meeting with analysts, TCS management spoke of greater traction from cloud adoption across industries.

JM Financial analysts add, “Similar to what colleagues like TCS suggest, Accenture also believes we are in an era of compressed digital transformation with customers accelerating their pandemic-driven journey to the Cloud.”

As such, IT companies remain in a prime position in a post-covid world.

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