For Immediate Release
Chicago, IL – August 23, 2022 – Zacks Equity Research shares Gartner (
IT Quick Quote IT - Free Report) as the Bull of the Day and Brinker International ( EAT Quick Quote EAT - Free Report) asthe Bear of the Day. In addition, Zacks Equity Research provides analysis on EQT Corp. ( EQT Quick Quote EQT - Free Report) , Cheniere Energy ( LNG Quick Quote LNG - Free Report) and SilverBow Resources ( SBOW Quick Quote SBOW - Free Report) .
Here is a synopsis of all five stocks.
Gartner is a $25 billion leader in information technology research and consulting. Headquartered in Stamford, CT, the company offers diverse industry expertise and technology-related insight necessary for informed decision-making at Fortune 1,000 companies.
Gartner's comprehensive services portfolio has enabled customers across sectors to research, analyze and interpret their data-dependent business with greater precision, efficiency and discipline.
You may be familiar with the Gartner Magic Quadrant which has become something like the JD Powers award of technology innovation.
Magic Quadrant (MQ) is a series of market research reports published by Gartner that rely on proprietary qualitative data analysis methods to demonstrate market trends, such as direction, maturity and participants.
Their analyses are conducted for several specific technology industries and are updated every 1–2 years: once an updated report has been published its predecessor is "retired". Thus, the value of making the list frequently as a leader of innovation.
Beat and Raise Quarter
On August 2, Gartner delivered a big beat-and-raise quarterly report. Adjusted earnings (excluding 32 cents from non-recurring items) per share of $2.85 beat the consensus mark by 33% and increased 27% year over year.
Revenues of $1.38 billion beat the consensus estimate by 4.4% and improved 17.9% year over year on a reported basis and 21.8% on a foreign-currency-neutral basis.
Total contract value was $4.3 billion, up 15.4% year over year on a foreign-currency-neutral basis.
Gartner reported Q2 adjusted EPS of $2.85 vs. the consensus of $2.15 and Q2 revenue of $1.377 billion vs. consensus of $1.32B.
CEO Gene Hall commented, "Gartner had another strong quarter with double-digit growth in contract value, revenue, and Adjusted EPS. We are again raising our guidance and remain well-positioned to deliver long-term, sustained, double-digit growth. And we continue to buy back stock, which will increase our per share results this year and beyond."
Quarterly Numbers in Detail
Revenues at the Research segment increased 13.9% year over year on a reported basis and 17.3% on a foreign-currency-neutral basis to $1.14 billion. Gross contribution margin was 73.9% in the reported quarter.
Revenues at the Conferences segment surged 95.1% year over year on a reported basis and 102.2% on a foreign-currency-neutral basis to $114 million. Gross contribution margin dropped to 64.8% in the reported quarter.
Revenues at the Consulting segment grew 13.9% year over year on a reported basis and 20.5% on a foreign-currency-neutral basis to $121 million. Gross contribution margin was 41.6% in the reported quarter.
Adjusted EBITDA of $389 million improved 9.5% year over year on a reported basis and 14.2% on a foreign-currency-neutral basis.
Operating cash flow totaled $416 million while free cash flow was $395 million in the reported quarter. Capital expenditures totaled $21 million. Gartner repurchased 1.8 million common shares for $479 million.
Boosted 2022 View
Adjusted EPS is anticipated to be $8.85 (previous view: $7.80). Adjusted EBITDA is projected to be $1.235 billion (previous view: $1.14 billion). Free cash flow is anticipated to be 985 million (previous view: $930 million).
Based on this guidance, analysts boosted this year's EPS consensus over 12% from $8.08 to $9.08.
Meanwhile, the topline is projected to grow 13.7% to $5.38 billion.
Baird analyst Jeffrey Meuler upped his price target on Gartner to $365 from $334 and kept an Outperform rating on the shares. The analyst likes Gartner as a multi-year compounder, and likes the risk/reward across a range of potential macro scenarios.
Meuler said he interprets management's updated commentary for go-forward underlying margins in the "low 20s" as a notable positive revision, especially given recent material outperformance of its public targets.
Wells Fargo analyst Seth Weber added to his price target on Gartner to $345 from $305 and kept an Overweight rating on the shares. The analyst noted that upside Q2 with a raised 2022 outlook underscores Gartner's well-entrenched position within core IT/tech markets, complemented by newer categories such as supply chain and HR.
Weber observed that these areas are supporting strong/resilient growth and considerable cash generation. Meanwhile, updated margin framework commentary should quell fears in that area.
BMO Capital analyst Jeffrey Silber raised his price target on Gartner to $305 from $265 and kept a Market Perform rating on the shares. The company's Q2 earnings beat was driven by strength in all three segments. Silber added that its research revenues also remained strong with retention at records highs.
Barclays analyst Manav Patnaik raised his price target on Gartner to $315 from $265 and kept an Equal Weight rating on the shares. The company's base margin guidance of low-20s, with modest expansion thereafter, is an encouraging development that could bode well long-term.
After the company report, Gartner shares jumped 7% and then found a few analysts scrambling to revise their lowered price targets from July.
This goes to show that the bull market in technology is alive and well, despite rising inflation and interest rates. You can understand why from my 2018 report The
Technology Super Cycle, whose long-tail principles remain in play. Brinker International is the owner-operator of over 1600 restaurants under the brands Chili's Grill & Bar and Maggiano's Little Italy.
The company reports June quarter earnings tomorrow August 24 before the market opens.
But analysts have already been lowering EPS estimates ahead of the report.
And that's why EAT has fallen into the cellar of the Zacks Rank.
In the past 90 days, the Zacks Consensus EPS projection has dropped from $3.20 to $3.11 for this year.
But the fiscal year ended in June, so that picture is over 3/4 in the bag.
The real concern is that the next fiscal year, which began in July has seen the profit consensus fall from $4.02 to $3.68.
This is most likely on worries that consumers will have less to spend on dining out as gas and grocery prices take a bite out of their budgets. And this is obviously a broader global call as Brinker operates in 29 countries.
Analysts Lower the Boom
In early August, we saw this call from Deutsche Bank:
Analyst Brian Mullan lowered his price target on Brinker to $33 from $41 and kept a Hold rating on the shares. Ahead of the company's fiscal Q4 earnings results later this month, the analyst updated his model to better account for the known deceleration in sales trends for most all restaurant chains.
And last week came two more sympathetic outlooks...
UBS analyst Dennis Geiger lowered his price target on Brinker to $34 from $41and kept a Neutral rating on the shares ahead of its Q4 results. While the company remains focused on driving continued traffic share gains and accelerating unit growth, its performance was not immune to slower industry sales in May and June.
Geiger further warns that cost pressures over the coming quarters could be the biggest drag on Brinker earnings.
KeyBanc analyst Eric Gonzalez downgraded Brinker International to Sector Weightfrom Overweight without a price target. The analyst cites valuation for the downgrade following the stock's 40% run over the last month.
Gonzales cited the prospect of deteriorating consumer confidence and spending over the next year as limiting factors on Brinker's earnings visibility. A changeover in management "also introduces the potential for a reinvestment cycle at a time when cost pressures remain a challenge," he concluded.
Bottom line on EAT:This week's earnings call will give more visibility on the eatery's hungry consumer base. But until the EPS estimates stop going down and start heading back up, just enjoy their food and let the stock simmer a bit more. The Zacks Rank will let you know when it's ready. Additional content: Time to Buy These 3 Stocks as Natural Gas Bulls Run Rampant
Natural gas prices moved past $9 per million British thermal units (MMBtu) in trading last week and finished at $9.336 on Friday. That was the highest settlement since August 2008 and primarily reflected hotter-than-normal weather, slack domestic output and strong LNG shipments.
Building on this bullish narrative, there is significant upside in natural gas-focused firms like
EQT Corp., Cheniere Energy and SilverBow Resources.
What Drove the Rally?
Investors might note that changes in temperature and weather forecasts can precipitate natural gas price swings. The latest models anticipate strong temperature-driven consumption (especially in most regions of the West), which is a positive for prices. A heat wave is expected to keep temperatures above average over the next few days, leading to a spike in cooling load demand.
Natural gas also remained supported by a stable demand catalyst in the form of continued strong liquefied natural gas (“LNG”) feedgas deliveries. LNG shipments for export from the United States have been robust for months on the back of environmental reasons and record-high prices of the super-chilled fuel elsewhere.
Now, with the Russia-Ukraine conflict, LNG has become even more coveted. As a matter of fact, the United States recently entered into a partnership with the EU to export additional LNG to wean the bloc off its dependence on Russian natural gas supplies. This means LNG deliveries are poised to rise further, especially with Moscow squeezing natural gas supplies to Europe by partly closing its key Nord Stream pipeline.
Looking at the supply side, production levels have struggled to match the peak levels achieved in early 2022 and late 2021. Over the past few months, natural gas output has consistently averaged under the 97 Bcf per day high of the last year-end. This pattern has led to a sizeable inventory deficit to its five-year average, which currently stands at nearly 13%. With the big upstream operators concentrating on free cash flow over production, volumes seem unlikely to recover heading into the winter demand season.
The tight stockpile levels have pushed up the price of the energy commodity with the apprehension that the market might enter the winter withdrawal season with supplies in storage well below normal. This can compound further if the cold turns out to be intense.
Buy These Gas-Heavy Names
Overall, given natural gas’ fundamental set-up, prices are expected to stay strong. The upward trend should aid gas-weighted producers.
To guide investors to the right picks, we highlight three companies that carry a Zacks Rank #2 (Buy). The Zacks Rank is a reliable tool that helps you to trade with confidence regardless of your trading style and risk tolerance. To learn more about how you can use this proven system for market-beating gains, visit Zacks Rank Education.
You can see
. the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here EQT Corp.: EQT is primarily an explorer and producer of natural gas, with a primary focus on the Appalachian Basin in Ohio, Pennsylvania and West Virginia. In terms of average daily sales volumes, EQT Corp is the largest natural gas producer in the domestic market.
The company has an expected earnings growth rate of 32.5% for the current year. The Zacks Consensus Estimate for EQT’s 2022 earnings has been revised 22% upward over the last 60 days. EQT — valued at around $17.7 billion — has soared 188% in a year.
Cheniere Energy: With the dramatic growth of natural gas exports and being the first company to receive regulatory approval to ship LNG from its Sabine Pass terminal, Cheniere Energy certainly enjoys a distinct competitive advantage.
The firm is valued at around $41.4 billion. The Zacks Consensus Estimate for LNG’s 2022 earnings has been revised 23% upward over the last 60 days. Cheniere has rocketed 93.3% in a year.
SilverBow Resources: SilverBow has operations across roughly 130,000 net acres in the Eagle Ford and more than 80% of its total output comprises natural gas. The company’s exposure to premium markets and focus on costs and margins should help it to benefit from high natural gas prices.
SilverBow beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 36.1%. Valued at around $850.7 million, SBOW has gained some 177.5% in a year.
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