Capgemini: Collateral victim of Accenture’s earnings warning, Capgemini stumbles in stock market

(BFM Bourse) – The digital services company posted the biggest drop in the CAC 40 this Thursday, penalized by its American peer Accenture which lowered its sales forecast for 2024.

For several quarters, many groups in the digital services sector have been experiencing a decline in demand from their customers, which is restraining their IT spending.

This is the case of American giant Accenture which cut its turnover forecast for the 2023-2024 financial year, which ends at the end of August, citing an “uncertain macroeconomic environment”. The IT services provider now expects revenue growth of between 1% and 3% at constant exchange rates, compared to earlier estimates of 2% to 5%.

The American consulting giant also announced that it expects adjusted earnings per share of between $11.97 and $12.2, compared to a previous range of $11.97 to $12.32.

The improvement comes as the company posted lower-than-market-expected sales at the end of the second quarter ended February. Accenture reported revenue of $15.80 billion, where the LSEG Refinitiv consensus expected sales of $15.84 billion.

For the third quarter, revenue estimates disappointed markets. Accenture expected revenue of between $16.25 billion and $16.85 billion, falling short of analysts’ expectations of $17.01 billion.

On Wall Street, this earnings warning did not please the market, which did not fail to approve of the error. Accenture shares tumbled 8.5%, dragging its French counterpart Capgemini in its wake.

After rising for a good part of the morning, shares of Capgemini fell sharply after the announcement of Accenture’s results warning. A red light for the CAC 40, the stock was down 3.2% around 4:40 pm.

The year 2025 is more dynamic than 2024

So the French digital services company suffers from an unfavorable cross-reading on the Paris stock exchange. But unlike Accenture, Capgemini was reassuring about its prospects when it published its annual accounts last February.

Its manager, Ayman Ezzat, then announced that the group would experience a trough in its activity in the first quarter of 2024, before a “gradual” improvement from the second quarter to reach an “exit rate” – i.e. the latest growth rate in the period – “stronger” in the fourth quarter of 2024. “. This will help prepare the activity for recovery in 2025, he added.

He was also reassuring about activity in North America, a highly sensitive area where demand for Capgemini’s services has seen a major slowdown at the end of the 2023 financial year.

“It’s starting to get a little more positive. I’m not saying the first quarter will see an improvement but we’re seeing more positive signs in the decision cycle (from customers, editor’s note) in the pipeline (orders, editor’s note). We expect an improvement in the second quarter. and then expect an acceleration in the second half,” said Ayman Ezzat. The general manager added, “We’re really hitting the trough of a recession in the United States.”

Sabrina Sadgui – ©2024 BFM Bourse