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Gartner Could Be Hinting At A Potential Acquisition

Gartner Could Be Hinting At A Potential Acquisition - IT

Although Gartner Inc IT 0.41% reported its 2Q results ahead of expectations, they reflected “increased pockets of weakness,” Baird’s Jeffrey P. Meuler said in a report. He maintained an Outperform rating on the company, while reducing the price target from $111 to $109.

Gartner reported its quarterly revenue at $610 million, representing 12 percent growth and beating the consensus estimate by 2 percent. Adj. EPS came in at $0.71, higher than the consensus expectation of $0.68.

Increased Pockets Of Weakness

Gartner’s results reflected “a mild incremental deterioration in Research metrics,” possibly due to “increased pockets of weakness (in weak geographies/industries and client-specific economic challenges),” analyst Jeffrey Meuler mentioned.

Total Contract Value growth decelerated to 13 percent, from 14 percent in the previous quarter. Client retention metrics also declined by 1 percent q/q.

“Our view is there does not appear to be a step function change in trend, but rather gradual incremental headwinds from increased pockets of relative weakness. We expect continued strong organic Research growth,” Meuler commented.

Potential Acquisition

In May 2015, Gartner had announced a new share repurchase authorization of $1.2 billion. This was expected to be executed over ~2.5-3 years. The analyst pointed out, however, that over the past four quarters, Gartner had repurchased shares worth merely $120 million.

Moreover, the company announced an expanded credit facility, citing “favorable financing conditions” and “greater flexibility,” Meuler mentioned.

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DateFirmActionFromTo
Mar 2016Sterne Agee CRTInitiates Coverage onBuy
Feb 2016BMO CapitalMaintainsMarket Perform
Feb 2016BarclaysMaintainsEqualweight

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