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Gartner (IT) Down 5.9% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Gartner (IT - Free Report) . Shares have lost about 5.9% in that time frame, underperforming the S&P 500.

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

Gartner Surpasses Q3 Earnings & Revenue Estimates

Gartner reported better-than-expected third-quarter 2021 results, wherein the company’s earnings and revenues surpassed the Zacks Consensus Estimate.

Adjusted earnings per share of $2.03 beat the consensus mark by 23% and increased more than 100% year over year. Revenues of $1.16 billion beat the consensus estimate by 2.2% and improved 16.3% year over year on a reported basis and 15% on a foreign currency-neutral basis.

Total contract value was $4 billion, up 13.8% year over year on a foreign currency-neutral basis.

Quarterly Numbers in Detail

Revenues at the Research segment increased 16.2% year over year on a reported basis and 14.8% on a foreign currency-neutral basis, to $1.04 billion. Gross contribution margin was 74.2% in the reported quarter.

Revenues at the Conferences segment grew 91.7% year over year on a reported basis and 93.2% on a foreign currency-neutral basis, to $24 million. Gross contribution margin was 46.9% in the reported quarter.

Revenues at the Consulting segment grew 6.3% year over year on a reported basis and 5.7% on a foreign currency-neutral basis, to $95 million. Gross contribution margin was 32.7% in the reported quarter.

Adjusted EBITDA of $305 million improved 82.3% year over year on a reported basis and 79.9% on a foreign currency-neutral basis.

Operating cash flow totaled $345 million and free cash flow was $331 million in the reported quarter. Capital expenditures totaled $14 million. The company repurchased 1.3 million common shares for $355 million.

2021 View

Gartner raised its full-year 2021 guidance. The company now expects total revenues to be $4.66 billion compared with the prior guidance of $4.57 billion. Adjusted EPS is now anticipated to be $8.54 compared with the prior guidance of $7.60. Adjusted EBITDA is now projected to be $1.26 billion compared with the prior guidance of $1.16 billion. Free cash flow is now anticipated to be $1.23 billion compared with the prior guidance of $1.13 billion.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 20.72% due to these changes.

VGM Scores

At this time, Gartner has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.

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

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Gartner has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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