Gartner (IT +2.00%) 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."
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.
