Please ensure Javascript is enabled for purposes of website accessibility

Gartner Inc. Expects Double-Digit Growth in 2017

By Joe Tenebruso - Feb 6, 2017 at 9:11AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

CFO Craig Safian sees a "vast market opportunity ahead" for the IT consulting company.

Gartner (IT 0.56%) reported fourth-quarter financial results on Feb. 2. The leading provider of research and analysis to the information technology industry delivered solid revenue growth and gave an optimistic outlook for the year ahead.

Person pushing IT button

Image source: Getty Images.

Gartner results: The raw numbers

MetricQ4 2016Q4 2015Year-Over-Year Change
Revenue $703.217 million $643.768 million 9%
Net income $66.485 million $65.763 million 1%
Earnings per share $0.79 $0.78 1%

Data source: Gartner Q4 2016 earnings press release.

What happened with Gartner this quarter?

  • Total revenue rose 9% year over year to $703.2 million -- and 10% excluding the impact of foreign exchange -- driven by strong growth in the research division.
  • Normalized EBITDA (earnings before interest, taxes, depreciation, and amortization), which excludes stock-based compensation and certain acquisition-related charges, increased 6% to $145.1 million and 3% on a currency-neutral basis.
  • Earnings per share -- adjusted to exclude acquisition-related items -- jumped 5% to $0.92.

Business segment results

Research revenue jumped 14% (15% in constant currency) to $478.8 million. Gross contribution margin held steady at 68%, as did client retention at 84%, while wallet retention (retention times revenue per customer) declined to 104%, down from 105% in the fourth quarter of 2015. Also, contract value was $1.93 billion at the end of 2016, a year-over-year increase of 9% (14% in constant currency).

Consulting revenue grew slightly to $88.1 million. Consulting segment gross contribution margin declined to 26% from 30% in the prior-year quarter, and utilization fell to 65% from 67%. Gartner's billable head count for its consultant force at the end of the quarter was 628, which was up from 606 in the year-ago period but down from 630 in the third quarter. Gartner's backlog also decreased, to $103.8 million as of Dec. 31, compared to $117.7 million at the end of 2015.

Additionally, revenue for Gartner's events business rose 1% to $136.3 million, with gross contribution margin declining to 54% from 57% in the year-ago period.

CEB acquisition

On Jan. 5, Gartner announced that it was acquiring CEB Inc. (CEB), the industry leader in providing best practice and talent management insights, for roughly $2.6 billion in cash and stock. Gartner will also assume CEB's approximately $700 million in net debt, placing the enterprise value of the deal at about $3.3 billion. The transaction is expected to close in the first half of 2017. 

In commenting on the deal in Gartner's earnings release, CEO Gene Hall said that the company expects the acquisition to "deliver significant value to our shareholders over both the short and long-term."

Looking forward

Gartner issued a preliminary financial outlook for 2017, including:

  • Total revenue of $2.680 billion to $2.745 billion, up 10% to 12% year over year
  • Normalized EBITDA of $495 million to $530 million, up 8% to 16%
  • Adjusted EPS of $3.15 to $3.35, up 6% to 13%
  • Operating cash flow of $385 million to $415 million, up 5% to 14%
  • Free cash flow of $348 million to $373 million, flat to up 7%

"And as our 2017 outlook demonstrates, we expect to continue our trend of double-digit growth with strong cash flow generation," said CFO Craig Safian during a conference call with analysts. "We are in a very strong position to capture the vast market opportunity ahead of us and continue to deliver long-term value for our shareholders."

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Gartner, Inc. Stock Quote
Gartner, Inc.
$250.04 (0.56%) $1.39
CEB Inc. Stock Quote
CEB Inc.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/23/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.