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Gartner (IT) Up 3.6% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Gartner (IT - Free Report) . Shares have added about 3.6% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Gartner due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Gartner Beats Q2 Earnings Estimates

Gartner reported better-than-expected second-quarter 2020 results, wherein the company’s earnings and revenues surpassed the Zacks Consensus Estimate.

Adjusted earnings per share of $1.20 beat the consensus mark by 51.9% but decreased 17.2% year over year. Revenues of $973.1 million beat the consensus estimate by 3.5% but declined 9.1% year over year on a reported basis and 7.6% on a foreign currency-neutral basis.

Total contract value was $3.4 billion, up 7% year over year on a foreign currency-neutral basis.

Quarterly Numbers in Detail

Revenues at the Research segment increased 6% year over year on a reported basis and 7.8% on a foreign currency-neutral basis to $875 million. Gross contribution margin was 72.3% in the reported quarter.

Revenues at the Consulting segment declined 5.9% year over year on a reported basis and 5.1% on a foreign currency-neutral basis to $97 million. Gross contribution margin was 34.4% in the reported quarter.

Adjusted EBITDA of $192 million improved 4% year over year on a reported basis and 6% on a foreign currency-neutral basis.

Operating cash flow totaled $343 million and free cash flow was $322 million in the reported quarter. Capital expenditures totaled $21 million.

2020 View

Gartner raised its full-year 2020 guidance. The company now expects total revenues to be $3.88 billion compared with the prior guidance of $3.81 billion. Adjusted EPS is anticipated to be $3.08 compared with the prior guidance of $3.00.

Adjusted EBITDA is projected to be $635 million compared with the prior guidance of $625 million. Free cash flow is anticipated to be $425 million compared with the prior guidance of $300 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -7.75% due to these changes.

VGM Scores

Currently, Gartner has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Gartner has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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