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Why Is Gartner (IT) Down 0.2% Since Last Earnings Report?

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It has been about a month since the last earnings report for Gartner (IT - Free Report) . Shares have lost about 0.2% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Gartner Misses Q4 Earnings and Revenue Estimates

Gartner reported disappointing fourth-quarter 2018 results, with earnings and revenues missing the respective Zacks Consensus Estimate. However, the metrics improved on a year-over-year basis.

Adjusted earnings of $1.20 per share missed the consensus mark by 5 cents but increased 3% on a year-over-year basis. Earnings were within the guidance of $1.18-$1.34.

Revenues of $1.089 billion beat the consensus mark by $4 million and improved 7% year over year on a reported basis and 9% on a foreign currency-neutral basis. Revenues were within the company’s guidance of $1.07-$1.12 billion. Adjusted revenues, excluding divested operations, totaled $1.088 billion, up 10% year over year on a reported basis and 12% on a foreign currency-neutral basis.

Strength across a majority of segments drove the top line. Total contract value was $3.2 billion, up 11% year over year on a foreign currency-neutral basis.

Quarterly Numbers in Detail

Revenues at the Research segment increased 15% year over year on a reported basis and 17% on a foreign currency-neutral basis to $797 million. Gross contribution margin was 68% in the reported quarter.

Revenues at the Conferences segment increased 18% year over year on a reported basis and 19% on a foreign currency-neutral basis to $196 million. Gross contribution margin was 52%.

Revenues at the Consulting segment grew 12% year over year on a reported basis and 14% on a foreign currency-neutral basis to $96 million. Gross contribution margin was 28% in the reported quarter.

Adjusted EBITDA, excluding divested operations, increased 6% year over year on adjusted as well as foreign currency-neutral basis to $211 million. Adjusted EBITDA margin contracted 30 basis points (bps) to 19.4%.

Operating cash flow totaled $45 million and free cash flow was $7 million in the reported quarter. Capital expenditures came in at $62 million.

2019 Outlook

Management projects revenues in the range of $4.22-$4.32 billion. Adjusted EPS is anticipated in the range of $3.82-$4.19. Adjusted EBITDA is projected in the range of $720-$765 million. Operating cash flow is anticipated between $542 million and $582 million while free cash flow is expected in the range of $455-$485 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -22.98% 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 D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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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