Gartner (IT) Q3 Earnings & Revenues Top Estimates, '18 View Up

Gartner, Inc. (NYSE:IT) reported robust third-quarter 2018 results, wherein earnings and revenues surpassed the respective Zacks Consensus Estimate. Both the metrics also improved on a year-over-year basis.

Adjusted earnings of 85 cents per share outpaced the consensus mark by 23 cents and increased 30.7% on a year-over-year basis.

Revenues of $921.7 million exceeded the consensus estimate by $1.9 million and improved 11.3% on a year-over-year basis. Adjusted revenues, excluding divested operations, came in at $910 million, up 11% year over year on a reported basis and 13% on a foreign currency-neutral basis. Strength across a majority of segments drove the top line. Total contract value was approximately $3 billion, up 12% year over year on a foreign currency-neutral basis.

So far this year, shares of Gartner have gained 19.8%, significantly outperforming 9.1% rise of the industry it belongs to.

Quarterly Numbers in Detail

Revenues at the Research segment increased 18% year over year on a reported basis and 20% on a foreign currency-neutral basis to $774.18 million. Gross contribution margin was 69% in the reported quarter. Under Global Technology Sales, client retention was 83% and wallet retention was 105%. Global Business Sales client retention was 83% and wallet retention was 97%.

Gartner, Inc. Price, Consensus and EPS Surprise

Revenues at the Consulting segment grew 9% year over year on a reported basis and 10% on a foreign currency-neutral basis to $78.75 million. Gross contribution margin was 23% in the reported quarter. Backlog, the key leading indicator of future revenue growth for the Consulting business, totaled $108 million.

Revenues at the Events segment increased 27% year over year on a reported basis and 31% on a foreign currency-neutral basis to $57.14 million. Gross contribution margin was 44%. Revenues at the Other segment summed $11.59 million, down 79.9% from the year-ago quarter number.

Adjusted EBITDA, excluding divested operations, increased 15% year over year to $149 million. Adjusted EBITDA margin contracted 50 basis points (bps) to 16.4%.

Operating cash flow totaled $249 million and free cash flow was $251 million in the reported quarter. Capital expenditures came in at $24 million.

Fourth-Quarter Guidance

Gartner issued fourth-quarter 2018 guidance for revenues, adjusted earnings and adjusted EBITDA. The company expects revenues in the range of $1.07-$1.12 billion. The Zacks Consensus Estimate of $1.11 billion is above the midpoint of the guided range.

Adjusted earnings are expected in the range of $1.18-$1.34 per share. The Zacks Consensus Estimate of $1.38 is above the guided range.

Adjusted EBITDA, excluding divested operations, is anticipated around $211-$231 million.

2018 Outlook

Gartner updated its guidance for 2018. The company now expects adjusted revenues in the range of $4.11-$4.21 billion compared with $3.9-$4.0 billion guided earlier. Adjusted EBITDA is projected in the $750-$800 million band compared with $710-$760 million as anticipated earlier.

Adjusted earnings per share are anticipated to be in the range of $3.71-$4.11 compared with $3.51-$3.91 guided earlier. The Zacks Consensus Estimate of $3.74 is below the midpoint of the currently guided range.

Operating cash flow is anticipated to lie between $437 million and $467 million compared with $425 million and $475 million as projected earlier. Free cash flow is expected in the range of $440-$460 million compared with $416-$456 million guided previously.

Zacks Rank & Upcoming Releases

Gartner currently carries a Zacks Rank #3 (Hold). 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 third-quarter earnings reports from key players like Genpact (NYSE:G) , Delphi Technologies (NYSE:DLPH) and Green Dot (NYSE:G) . While Genpact will report on Nov 6, Delphi Technologies and Green Dot will release quarterly results on Nov 7.

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