Gartner (NYSE:IT) announced fourth-quarter 2018 results early on Feb. 5. The research and advisory products and services leader detailed reasonably solid growth -- though that growth was held back as the company transitions away from some of its legacy products and toward newer offerings with greater long-term growth potential. 

With shares falling around 1.4% on Tuesday as the market absorbs the news, let's dig deeper to better understand the state of Gartner's business today, and what investors should expect in the coming quarters.

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Image source: Getty Images.

Gartner results: The raw numbers

Metric

Q3 2018

Q3 2017

Year-Over-Year Change

GAAP revenue

$1.089 billion

$1.015 billion

7.3%

GAAP net income (loss)

$84 million

$107 million

(21.5%)

GAAP earnings (loss) per diluted share

$0.92

$1.16

(20.7%)

Data source: Gartner. GAAP = generally accepted accounting principles. 

What happened with Gartner this quarter?

  • Excluding divested operations, Gartner's (non-GAAP) earnings climbed 2.6% to $1.20 per share, and revenue grew 10% (or 12% at constant currency) to $1.088 billion.
  • These results arrived near the low end of Gartner's guidance (provided in early November) for revenue in the range of $1.07 billion to $1.115 billion, and adjusted net income per share of $1.18 to $1.34.
  • Gartner repurchased 1.1 million shares during the quarter for $156 million.
  • By segment on an adjusted basis: 
    • Research revenue increased 9% year over year (11% at constant currency) to $796 million.
    • Conferences revenue grew 16% (18% at constant currency) to $196 million.
    • Consulting revenue climbed 12% (14% at constant currency) to $96 million.
  • Global technology sales contract value climbed 14% year over year on a constant-currency basis to $2.6 billion.
  • Global business sales (GBS) contract value rose 1% year over year to $0.6 billion.
  • Cash flow from operations totaled $45 million, and free cash flow came to $7 million.

What management had to say

Gartner CEO Gene Hall stated:

In 2018, we delivered another year of double-digit revenue growth and strong results across our three segments. We continue to achieve sustained, free cash flow growth and have resumed our share repurchase program to return capital to shareholders. As we enter 2019, we're better positioned than ever to deliver indispensable value to leaders across every function in the enterprise.

During the subsequent conference call, Hall reminded investors that Gartner has divested non-core operations in recent quarters as it works to transition away from its legacy GBS products and toward higher-value GxL products -- with "GxL" being the term used for products that cater to business leaders across the enterprise. But as we're still early in that transition, the acceleration in GxL sales hasn't been enough to outpace the decline from legacy products.

Looking forward 

That should change in 2019. As Gartner continues to introduce more GxL functions to replace legacy GBS products, and as its salespeople continue to navigate the learning curve for these newer offerings, the company anticipates achieving double-digit contract value growth by the end of this year.

As such, Gartner expects full-year 2019 revenue to arrive in the range of $4.220 billion to $4.315 billion, good for growth of 9% to 11% from 2018. On the bottom line, that should translate to adjusted earnings per share of $3.82. to $4.19, for year-over-year growth of 5% to 15%. For perspective -- and though we don't typically pay close attention to Wall Street's demands -- most analysts were modeling 2019 earnings and revenue slightly above the high ends of Gartner's guidance ranges.

To be fair, between Gartner's honed focus through divestments and its transition toward GxL products, the company appears well positioned to more effectively drive sustained long-term growth. Until those efforts result in a more tangible acceleration in growth, however, and combining Gartner's relative shortfall to end 2018 with its seemingly conservative view of the coming year, it's no surprise to see the stock pulling back in response.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.