Gartner (IT) Beats On Q1 Earnings & Revenues, Cuts '18 View

Gartner, Inc. (NYSE:IT) reported strong first-quarter 2018 results with revenues and earnings surpassing the Zacks Consensus Estimate.

Adjusted earnings of 72 cents per share beat the consensus mark by 14 cents and increased 20% year over year.

Total revenues of $963.56 million beat the Zacks Consensus Estimate of $929 million. The figure was up 54% year over year. Adjusted revenues of $974 million were up 16% from the year-ago quarter. Strength across the majority of the segments drove the top line.

Total contract value for Gartner business was approximately $2.9 billion, up 12% year over year.

We observe that shares of Gartner have gained 7.2% in the past three months, outperforming the industry’s gain of 1.4%.

Let’s check out the numbers.

Revenues by Segment

Research segment’s revenues increased 49% year over year to $763.92 million. The quarterly gross contribution margin was 70% for the quarter, up from 69% in the year-ago period.

Under Global Technology Sales, client retention was 83% and wallet retention was 104%. Global Business Sales client retention was 82% and wallet retention was 99%.

Consulting segment revenues grew 5% from the year-ago quarter to $82.89 million. Backlog, the key leading indicator of future revenue growth for the Consulting business, was $104 million compared with $89 million in the prior-year period. Gross contribution margin was 29% compared with 30% in the year-earlier quarter.

Events segment revenues increased 31% from the year-ago quarter to $46.08 million. Gross contribution margin was 35%, down from 38% in the first quarter of 2017.

Talent Assessment & Other segment revenues were $70.65 million, while gross contribution margin was 61%.

Operating Results

Adjusted EBITDA increased 13.4% year over year to $161 million. Adjusted EBITDA margin declined to 16.7% from 22.7% in the year-ago quarter.

Balance Sheet and Cash Flow

Gartner exited first-quarter 2018 with cash and cash equivalents of $189.98 million compared with $538.91 million at the end of December 2017. As of Mar 31, 2018, long-term debt was $2,186.06 million compared with $2,899.12 million at the end of December 2017.

Operating cash flow was $3 million and free cash flow was $27 million in the reported quarter.

2018 Outlook

Gartner lowered its guidance for 2018. The company currently expects revenues in the range of $3.9–$4.0 billion, compared with the earlier expectations of $4.1-4.2 billion. The Zacks Consensus Estimate stands at $4.2 billion, which is above the currently guided range.

Adjusted earnings are expected in the range of $3.51–$3.91 per share, compared with $3.71–$4.11 expected earlier. The Zacks Consensus Estimate stands at $3.89, within the currently guided range.

Adjusted EBITDA is expected in the range of $710-760 million compared with $750-$800 million expected earlier.

Operating cash flow is expected in the range of $425-475 million compared with $460-$510 million expected earlier. Free cash flow is expected in the range of $416-456 million compared with $451-$491 million expected earlier.

Zacks Rank & Upcoming Releases

Gartner currently has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Investors interested in the broader Business Services sector are keenly awaiting earnings reports from key players like ABM Industries Incorporated (NYSE:ABM) , Accenture plc (NYSE:ACN) and FactSet Research Systems Inc. (NYSE:FDC) . While Accenture and FactSet Research Systems are expected to report third-quarter fiscal 2018 numbers on Jun 28 and Jun 26, respectively, ABM Industries is expected to release second-quarter fiscal 2018 results on Jun 6.

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