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Gartner (IT) Up 1.3% Since Last Earnings Report: Can It Continue?

·3 min read

A month has gone by since the last earnings report for Gartner (IT). Shares have added about 1.3% in that time frame, outperforming 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 Surpasses Q1 Earnings & Revenue Estimates

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

Adjusted earnings per share of $2.00 beat the consensus mark by 90.5% and increased 66.7% year over year. Revenues of $1.10 billion beat the consensus estimate by 5.4% and improved 8.4% year over year on a reported basis and 5.7% on a foreign currency-neutral basis.

Total contract value was $3.7 billion, up 5.8% year over year on a foreign currency-neutral basis.

Quarterly Numbers in Detail

Revenues at the Research segment increased 7.7% year over year on a reported basis and 5.3% on a foreign currency-neutral basis, to $980 million. Gross contribution margin was 73.9% in the reported quarter.

Revenues at the Conferences segment improved 78.8% year over year on a reported basis and 68.5% on a foreign currency-neutral basis, to $25 million. Gross contribution margin was 56% in the reported quarter.

Revenues at the Consulting segment grew 3.9% year over year on a reported basis and remained flat on a foreign currency-neutral basis, at $100 million. Gross contribution margin was 39.3% in the reported quarter.

Adjusted EBITDA of $320 million improved 50% year over year on a reported basis and 44.2% on a foreign currency-neutral basis.

Operating cash flow totaled $157 million and free cash flow was $145 million in the reported quarter. Capital expenditures totaled $13 million.

The company repurchased 2.3 million common shares for $398 million during the reported quarter. Further, its board of directors raised the share repurchase authorization by $500 million in April 2021.

2021 View

Gartner raised its full-year 2021 guidance. The company now expects total revenues to be $4.51 billion compared with the prior guidance of $4.37 billion. Adjusted EPS is now anticipated to be $6.25 compared with the prior guidance of $4.10. Adjusted EBITDA is now projected to be $1 billion compared with the prior guidance of $760 million. Free cash flow is now anticipated to be $850 million compared with the prior guidance of $630 million.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 48.71% due to these changes.

VGM Scores

Currently, Gartner has an average Growth Score of C, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the fifth 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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