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Gartner (IT) Down 6.2% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Gartner (IT - Free Report) . Shares have lost about 6.2% 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 the most recent earnings report in order to get a better handle on the important drivers.

Gartner Surpasses Q2 Earnings Estimates, Revises ’19 View

Gartner reported mixed second-quarter 2019 results, wherein the company’s earnings surpassed the Zacks Consensus Estimate but revenues missed the same.

Adjusted earnings per share of $1.45 beat the consensus mark by 27 cents and increased 40.7% on a year-over-year basis. Earnings exceeded the guided adjusted EPS range of $1.15-$1.20.

Revenues of $1.07 billion however lagged the consensus estimate by $6.8 million but improved 7% year over year on a reported basis and 9% on a foreign currency-neutral basis. Adjusted revenues improved 9% year over year on a reported basis and 12% on a foreign currency-neutral basis.

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 7% year over year on a reported basis and 10% on a foreign currency-neutral basis to $826 million. Gross contribution margin was 69% in the reported quarter.

Revenues at the Conferences segment increased 27% year over year on a reported basis and 29% on a foreign currency-neutral basis to $141 million. Gross contribution margin was 57%.

Revenues at the Consulting segment grew 7% year over year on a reported basis and 10% on a foreign currency-neutral basis to $104 million. Gross contribution margin was 33% in the reported quarter.

Adjusted EBITDA of $185 million increased 1% year over year on a reported basis and 4% on a foreign currency-neutral basis. Operating cash flow totaled $227 million and free cash flow was $197 million in the reported quarter. Capital expenditures came in at $39 million.

2019 View

Gartner updated its full-year 2019 guidance. The company now projects revenues in the range of $4.22-$4.26 billion compared with the previously guided range of $4.22-$4.32 billion. Adjusted EPS is anticipated in the range of $3.39-$3.64 compared with the previously guided range of $3.82-$4.19. Adjusted EBITDA is projected in the range of $670-$700 million compared with the previously guided range of $720-$765 million. Operating cash flow is anticipated in the range of $487-$527 million compared with the prior guidance of $542 million to $582 million while free cash flow is expected in the range of $400- 430 million compared with the previously guided range of $455-$485 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -23.68% 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. It's no surprise Gartner has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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