Why Is Gartner (IT) Down 18.3% Since Last Earnings Report?

A month has gone by since the last earnings report for Gartner (IT). Shares have lost about 18.3% 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 Beats on Q4 Earnings and Revenues

Gartner reported solid fourth-quarter 2019 results, wherein the company’s earnings and revenues surpassed the Zacks Consensus Estimate.

Adjusted earnings per share of $1.18 beat the consensus mark by 43.9% but decreased 2% on a year-over-year basis.

Revenues of $1.20 billion outpaced the consensus estimate by 0.4% and improved 11% year over year on a reported basis and on a foreign currency-neutral basis. Adjusted revenues also improved 11% year over year on a reported basis and on a foreign currency-neutral basis.

Total contract value was $3.4 billion, up 12% year over year on a foreign currency-neutral basis.

Quarterly Numbers in Detail

Revenues at the Research segment increased 11% year over year on a reported basis and on a foreign currency-neutral basis to $882 million. Gross contribution margin was 70% in the reported quarter.

Revenues at the Conferences segment increased 11% year over year on a reported basis and 12% on a foreign currency-neutral basis to $217 million. Gross contribution margin was 53%.

Revenues at the Consulting segment grew 9% year over year on a reported basis and on a foreign currency-neutral basis to $104 million. Gross contribution margin was 28% in the reported quarter.

Adjusted EBITDA of $218 million improved 3% year over year on a reported basis and 5% on a foreign currency-neutral basis.

Operating cash flow totaled $83 million and free cash flow was $40 million in the reported quarter. Capital expenditures totaled $53 million.

2020 View

Gartner unveiled its full-year 2020 guidance. The company expects revenues to register approximately 9% growth on a foreign currency-neutral basis. Adjusted EPS is anticipated to be roughly $4.06. Adjusted EBITDA margin is projected to register at least 16.1% growth or above. Operating cash flow is anticipated to be approximately $627 million and free cash flow is expected to be roughly $505 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

At this time, Gartner has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, 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 this revision 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.