Gartner Inc. (IT) reported fourth quarter 2010 diluted earnings per share of 39 cents, which inched past the Zacks Consensus Estimate of 38 cents. The EPS, which excluded acquisition adjustments, increased 39.3% year over year and 69.6% sequentially.
For full year 2010, diluted EPS excluding acquisition adjustments increased 26.4% to $1.10 per share. This also surpassed the Zacks Consensus Estimate for 2010 of $1.08 per share.
According to management, Gartner achieved record levels of new business and contract value, while many other key business metrics continued to show strength. For the fifth consecutive quarter, the company improved upon its client and wallet retention.
Quarter & Year: Highlights
Revenues for the reported quarter surged 16.3% from the prior year quarter to $382.3 million. Excluding the impact of foreign exchange, revenues for the quarter increased 17%. This beat the Zacks Consensus Revenue Estimate of $379.0 million.
For full year 2010, total revenue increased 13% from the prior year to $1,288.5 million, moving ahead of the Zacks Consensus Revenue Estimate for 2010 of $1285.0 million.
In the Research segment, Gartner posted revenue of $230.6 million, increasing 19% from the year-ago-quarter, while full year revenue increased 14% to $865.0 million, excluding the impact of foreign exchange. With a contract value of $977.7 million, which increased 25% from the prior year quarter, Gartner recorded the highest contract value in the company’s history. Client and wallet retention rates increased from 78% and 87% to 83% and 98%, respectively.
Revenue in the Consulting segment increased 11% year-over-year to $89.3 million for the quarter and increased 6% to $302.1 million for full year 2010 revenue. The increase in revenues excluded the impact of foreign exchange. As on December 31, 2010, backlog totaled $100.8 million, up 11% versus December 31, 2009.
For the Event segment, Gartner posted a year-over-year increase of 21% to $62.4 million. Full year revenue jumped 21% to $121.3 million.
During fourth quarter 2010, Gartner held 12 events with 18,194 attendees and for full year the company organized 56 events with 37,219 attendees.
During the quarter, cash from operating activities was $79.1 million and totaled $205.5 million for the full year. As of December 31, 2010, Gartner had total debt of $220.2 million, versus $329.0 million at end of last year.
Operating income increased 27.3% from the prior year quarter to $53.1 million and operating margin was 13.9%.
Looking Ahead
Gartner expects revenue in the range of $1.43-$1.48 billion for 2011 and EPS between $1.29 and $1.41 per share. The Zacks Consensus Estimate is at $1.45 billion in revenue and EPS of $1.36.
Conclusion
Estimates for the quarter had moved up by a penny over the past month. The full-year estimate for next year decreased by a penny over the past week as one analyst gave a negative revision. The current Zacks Consensus Estimate for 2011 is $1.36. The full-year Zacks Consensus Estimate for 2010 had been stable in the run up to the earnings release at $1.08.
Peers for Gartner include, FactSet Research Systems Inc. (FDS), Moody’s Corp. (MCO) and Equifax Inc. (EFX).
We currently have a Zacks #4 Rank for Gartner, which translates into a Sell rating on short term basis. For long-term we currently have a Neutral recommendation.
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