Please ensure Javascript is enabled for purposes of website accessibility

Gartner Guides Light After Ending 2019 on a High Note

By Steve Symington - Feb 7, 2020 at 9:02AM

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

The research and advisory company continues to lean on the value proposition it brings to the table.

Gartner (IT 2.80%) released fourth-quarter 2019 results early Tuesday, and it was apparent the market wasn't pleased, as shares plunged 6% in response. But with echoes of last quarter's reasonably solid showing in mind, it was mixed forward guidance from the research and advisory services leader that raised the ire of investors this time.

Let's dive in for a better idea of how Gartner ended 2019, starting with its headline numbers:

Metric

Q4 2019

Q4 2018

Change

GAAP revenue

$1.203 billion

$1.089 million

10.5%

GAAP net income

$68 million

$84 million

(19%)

GAAP earnings per diluted share

$0.75

$0.92

(18.5%)

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

Digging deeper

To be fair, these GAAP results include items like acquisition expenses, one-time tax items, and proceeds from divestments. Excluding those items, Gartner's adjusted (non-GAAP) earnings arrived at $106 million, or $1.18 per share, down a modest 1.7% from $1.20 per share a year earlier.

By comparison, most analysts were looking for lower adjusted earnings of $0.81 per share on revenue of $1.19 billion.

For the full year of 2019, that brought Gartner's revenue to $4.245 billion, with adjusted net income of $355 million, or $3.90 per share. Both Gartner's top and bottom lines compared favorably to the full-year guidance the company reaffirmed in October, which called for revenue of $4.22 billion to $4.26 billion and adjusted earnings per share of $3.39 to $3.64.

"2019 was another year of double-digit contract value and revenue growth for Gartner," stated Gartner CEO Gene Hall. "We will continue to leverage the Gartner Formula for Growth and our compelling client value proposition to capture our enormous market opportunity."

Two people working on research at a desk with papers and a notebook computer.

Image source: Getty Images.

On a segment basis, Gartner's global technology sales (GTS) contract value continued to lead the way, rising 12% year over year to $2.8 billion (and up from $2.6 billion last quarter). Global business sales (GBS) contract value also climbed 8% (or 9% at constant currencies) to $0.6 billion.

Breaking it down further, Gartner's research-centric revenue climbed 11% to $882 million, conferences revenue increased 11% (12% at constant currency) to $217 million, and consulting revenue rose 9% to $104 million.

Looking forward

Gartner's relative outperformance to end 2019 was admirable. But its forward guidance was less impressive; Gartner told investors to expect full-year 2020 revenue to increase roughly 9% both as reported and at constant currencies, which should translate to adjusted earnings of roughly $4.06 per share (up from $3.90 per share in 2019).

By contrast, most analysts were modeling slightly lower 2020 earnings of $4.01 per share, but on more robust 10.4% revenue growth.

During the subsequent conference call, Gartner CFO Craig Safian elaborated that Gartner is now working to better align its cost growth with revenue growth in the coming year. He also added that Gartner's top-line expectations assume currency-neutral revenue growth of 9.5% on the research side, 10% from conferences, and only 3% from the consulting segment. On the latter, Gartner believes its consulting business outlook reflects a "very challenging" year-over-year comparison given its "strong contact optimization year in 2019."

Nonetheless, Gartner management sounds generally pleased with the current state of the business, its steady industry leadership, and its growth prospects. But with this top stock already having rallied more than 30% from last summer's lows leading into this week's update, it was no surprise to see shares pull 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.

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.
IT
$307.99 (2.80%) $8.40

*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 analyst team.

Stock Advisor Returns
400%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/14/2022.

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.