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Why Is Gartner (IT) Up 12.1% Since Last Earnings Report?

A month has gone by since the last earnings report for Gartner (IT). Shares have added about 12.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Gartner due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Gartner Surpasses Q1 Earnings & Revenue Estimates

Gartner  reported better-than-expected first-quarter 2023 results, wherein both earnings and revenues surpassed the respective Zacks Consensus Estimate.

Adjusted earnings (excluding 49 cents from non-recurring items) per share of $2.88 beat the Zacks Consensus Estimate by 41.2% and increased 23.6% year over year. Revenues of $1.41 billion beat the Zacks Consensus Estimate by 1.3% and improved 11.6% year over year on a reported basis and 14.3% on a foreign-currency-neutral basis.

The total contract value was $4.5 billion, up 10.4% year over year on a foreign-currency-neutral basis.

Quarterly Numbers in Detail

Revenues in the Research segment increased 7.1% year over year on a reported basis and 9.5% on a foreign-currency-neutral basis to $1.22 billion. The gross contribution margin was 73.9% in the reported quarter.

The Conferences segment’s revenues surged more than 100% year over year on a reported basis as well as on a foreign-currency-neutral basis to $64.6 million. The gross contribution margin was 41.4% in the reported quarter.

Revenues in Consulting segment grew 9.5% year over year on a reported basis and 14.1% on a foreign-currency-neutral basis to $127 million. The gross contribution margin was 40% in the reported quarter.

Adjusted EBITDA of $379 million improved 15.3% year over year on a reported basis and 19.1% on a foreign-currency-neutral basis.

Operating cash flow totaled $165 million while free cash flow was $144 million in the reported quarter. Capital expenditures totaled $21 million. Gartner repurchased $107 million worth of common shares.

2023 Outlook

Adjusted EPS is anticipated to be $9.50.

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Adjusted EBITDA is projected to be $1.33 billion.

Free cash flow is anticipated to be $920 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

At this time, Gartner has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. 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 upward for the stock, and the magnitude of these revisions looks promising. Notably, Gartner has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Gartner is part of the Zacks Consulting Services industry. Over the past month, FTI Consulting (FCN), a stock from the same industry, has gained 6.2%. The company reported its results for the quarter ended March 2023 more than a month ago.

FTI Consulting reported revenues of $806.71 million in the last reported quarter, representing a year-over-year change of +11.5%. EPS of $1.34 for the same period compares with $1.66 a year ago.

For the current quarter, FTI Consulting is expected to post earnings of $1.56 per share, indicating a change of +9.1% from the year-ago quarter. The Zacks Consensus Estimate has changed -1.9% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for FTI Consulting. Also, the stock has a VGM Score of F.

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