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Gartner (IT) Hits 52-Week High on Solid Growth Dynamics


Shares of information technology services provider Gartner, Inc. IT scaled a new 52-week high of $130.39 in yesterday’s trading session, before closing a tad lower at $130.31 for a solid one-year return of 36.2%. Barring minor hiccups, the company’s share price has steadily been on an uptrend since late November last year. This Zacks Rank #3 (Hold) stock has the potential for further price appreciation with long-term earnings growth expectations of 16%.

Growth Drivers

Gartner offers timely, thought-provoking and comprehensive analysis known for its high quality, independence and objectivity. This unbiased, pragmatic and actionable insight can help organizations to effectively save thousands of dollars through in-depth research. With rapid strides in technology and massive proliferation of the Internet of Things, the differences between the physical and digital worlds have gradually blurred. As a result, information technology has become critical for all firms to support higher productivity, improve performance metrics and protect the enterprise from cyber-security threats. In order to keep abreast of the new developments in the dynamic and complex industry and take well-informed decisions to maximize returns on IT capital investments, business enterprises and government agencies solicit Gartner’s research and consultancy services. This offers a strong value proposition for the company.

With a diligent execution of operational plans, Gartner has recorded double-digit growth in key metrics over a decade. In addition, this performance-driven firm has a strong cash flow and a healthy balance sheet position. The company has a vast, untapped market opportunity worth an estimated $61 billion.

Over the years, Gartner research reports have become indispensable tools for diverse companies across different sectors, strengthening its leading position in the market. Using advanced technologies to collect and analyze troves of data, Gartner draws on unique data assets and deep domain expertise to provide key insights and decision support solutions for informed decision-making process. These insights are typically drawn from a critical fact base, collated from interactions with clients in more than 11,000 distinct organizations worldwide, 230,000 annual one-on-one client communications and 18,000 vendor briefings.

Gartner has a recurring revenue stream with 75% of its total revenues generated through subscription and long-term contracts. In addition, the company has a large and diverse addressable market with low customer concentration that mitigates operating risks. Operating in an industry with low barriers to entry, Gartner has an integrated research and consulting team designed to serve client needs. This gives it a competitive advantage against rivals. Leveraging the breadth and depth of its intellectual capital, Gartner creates and distributes proprietary research content as broadly as possible via published reports, interactive tools, facilitated peer networking, briefings, consulting and advisory services, and events. These facilitate a steadily improving revenue stream for the company, which has witnessed a CAGR of 11.5% from 2009 to 2016.

The acquisition of CEB further reinforces Gartner’s market strength. The combination of the company’s analyst-driven, syndicated research and advisory services with CEB’s best practice and talent management insights across a range of business functions is likely to provide a comprehensive and differentiated suite of services. In order to better reflect the successful integration of CEB, Gartner has updated its earlier guidance for full-year 2017. The company currently expects GAAP revenues in the range of $3,257-$3,327 billion compared with earlier expectations of $3,225-$3,320 billion, and adjusted EPS in the range of $3.39-$3.50 compared with $3.32-$3.49 expected earlier.

Such a bullish outlook with continued growth impetus and core focus perhaps boosted investors’ confidence and catapulted its share price to a new 52-week high.

Stocks to Consider

Some better-ranked stocks in the industry are S&P Global Inc. SPGI, TransUnion TRU and IHS Markit Ltd. INFO, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

S&P Global has a healthy long-term earnings growth expectation of 12.5%. It has topped earnings estimates in each of the trailing four quarters with an average positive surprise of 11.1%.

TransUnion has a modest long-term earnings growth expectation of 10%. It has topped earnings estimates in each of the trailing four quarters with an average positive surprise of 10.3%.

IHS Markit has a modest long-term earnings growth expectation of 11.7%. It has topped earnings estimates twice in the trailing four quarters with an average positive surprise of 2.4%.

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