Macro Wrap – A Tale of Two Earnings, $NKE and $ACN Recap

by Enis September 27, 2013 7:06 am • Commentary

Nike and Accenture are both $50 billion plus market cap companies that both have more than 50% of their sales outside of the U.S.  These two multinationals both reported yesterday after the close, with seriously divergent results.

Nike reported a very strong beat on its earnings release yesterday, earning $0.86 per share vs. the $0.78 consensus estimate.  Its global futures orders were up 10% vs. 7.7% expected.  North America and Europe were both much stronger than expected.  The company also improved its margins and benefitted from many of the broad trends that have been supportive of U.S. corporate profits over the last few years:  lower tax rate, going from 26.9% to 25%, lower share count due to its large buyback program, and reduced raw materials costs from lower commodity prices.

While NKE is firing on all cylinders, ACN was more of a mixed bag.  While it beat on both revenues and consensus EPS estimates (by a penny, $1.01 vs. $1.00) for the quarter, its revenue and earnings guidance for 2014 was weaker than expected.  Its guidance for Q1 2014 was $7.0-$7.3 billion, vs. $7.4 billion expected.

For ACN as well, the Americas was the best geography.  Health and Public Service was the best division in terms of year-over-year growth.  Europe was stable and Asia was weak.  Of course, the weak guidance going forward is reflective of what many large multinational consulting and outsourcing firms have indicated about business growth (most notably, IBM and INFY).

2013 continues to be a year where buying the outperformers and selling the underperformers pays off.  NKE was up almost 40% year-to-date into this report, and is up about 5% in pre-market trading after the strong beat.  ACN was underperforming the broader market, up only about 15% YTD, and is indicated down 2-4% in the pre-market.  Earnings season really kicks off in 2 weeks.  For now, the winners can do no wrong.