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On Wednesday, BMO Capital Markets adjusted its price target for Gartner (NYSE:IT) shares, increasing it slightly from $459.00 to $465.00 while maintaining a Market Perform rating on the company. The revision comes after Gartner reported financial results that exceeded expectations in terms of margins but presented a less favorable operational outlook for the future. According to InvestingPro data, Gartner maintains strong profitability with a 67.8% gross margin and trades at a P/E ratio of 27.1x, which aligns with its position as a prominent player in the IT Services industry.
The company’s recent performance has been impacted by a significant renewal cycle with the US Federal Government in the first quarter of 2025. Approximately 40% of contracts were up for renewal, with about half of those not being renewed. Additionally, Gartner experienced slower decision-making processes among other clients, leading to a decline in new business across both its Global Technology Sales (GTS) and Global Business Sales (GBS) segments. Despite these challenges, the company maintains a healthy financial position with a solid Altman Z-Score of 6.6 and revenue growth of 6% over the last twelve months.
Despite these challenges, Gartner’s constant currency guidance for 2025 was only modestly reduced, and any negative impact was largely mitigated by favorable foreign exchange benefits. Analysts at BMO Capital believe that the market had already anticipated the churn from the Federal Government and some macroeconomic weakness prior to the quarter’s results.
As a result of these factors, BMO Capital has mostly increased its estimates for Gartner’s financial performance, which is reflected in the updated price target. The firm’s analysis suggests that while there are some headwinds, the overall investor sentiment had already accounted for these issues, leading to the decision to adjust the target price accordingly.
In other recent news, Gartner Inc. reported its first-quarter earnings for 2025, revealing adjusted earnings per share of $2.98, which exceeded analyst expectations of $2.75. The company’s revenue aligned with forecasts, reaching $1.53 billion. Despite the positive earnings report, Gartner’s stock price experienced a decline, reflecting broader market concerns. The company also noted a significant year-over-year increase in free cash flow by 73%, emphasizing its strategic focus on AI innovations and sales force expansion. Furthermore, Gartner has provided guidance for 2025, projecting consolidated revenue of at least $6.535 billion and an adjusted EPS of at least $11.70. The company anticipates research revenue to reach at least $5.34 billion. Analysts have not provided any recent upgrades or downgrades, but the firm continues to navigate challenges, including macroeconomic volatility and prolonged sales cycles in certain segments.
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