Why is CDW (CDW) up 2% since the last earnings report?

It has been about a month since CDW (CDW) last reported earnings. Shares rose about 2% in that time, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is CDW facing a pullback? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the company’s most recent earnings report in order to better understand the important catalysts.

CDW’s first quarter results missed estimates

CDW Corporation reported first-quarter 2024 non-GAAP earnings per share (EPS) of $1.92, missing the Zacks Consensus Estimate of $2.16. Moreover, the financial result decreased by 5.5% year-on-year.

The company’s revenue fell 4.5% year-over-year to $4.872 billion. Net sales decreased 4.9% on a constant currency basis. The decline was due to weakness in all business segments. However, quarterly revenue topped the consensus estimate of $4.396 billion.

Quarterly details

CDW’s corporate segment net sales were $2.136 billion, down 3.1% year-over-year.

Small Business segment net sales of $381 million decreased 7.4% year-over-year.

Public segment net sales were $1.725 billion, down 4.9% from the same quarter last year. Revenue from education customers declined 10.4%.

Healthcare revenues fell 1.8%, while government revenues fell 1.5%.

Net sales in other segments (Canadian and UK operations) decreased 6.5% to $631 million.

CDW’s gross profit of $1.063 billion declined 2.4% year-over-year. Gross margin increased 50 basis points (bps) to 21.8% due to favorable contribution from net revenues, primarily software as a service.

Non-GAAP operating income decreased 7.1% year-over-year to $403.5 million. Additionally, non-GAAP operating margin decreased 20 basis points to 8.3%.

Selling and administrative expenses increased 0.2% year-over-year to $735.3 million, primarily due to workplace optimization costs.

Balance sheet and cash flow

As of March 31, 2024, CDW had $803.8 million in cash and cash equivalents compared to $588.7 million as of December 31, 2023.

The company has long-term debt of $5.02 billion, down from $5.03 billion as of December 31, 2023.

CDW generated $440 million in operating cash flow in the first quarter, compared to $365 million in the year-ago period.

How have estimates changed since then?

It turns out that new estimates have been trending downward over the past month.

VGM results

Right now, CDW has a great A growth score, a rating with the same score on the dynamics front. However, the stock is rated C for value, putting it in the middle 20% for this investment strategy.

Overall, the company’s Total VGM Score is A. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company are generally on a downward trend, and the magnitude of these revisions indicates a downward shift. No wonder CDW has a Zacks Rank #4 (Sell). We expect a below-average rate of return on stocks in the coming months.

Industry player performance

CDW is part of the Zacks Computers – IT Services industry. Shares of Fair Isaac ( FICO ) in the same industry have gained 11.8% over the past month. More than a month ago, the company published its results for the quarter ended March 2024.

In its most recent quarter, Fair Isaac reported revenue of $433.81 million, representing a year-over-year change of +14.1%. EPS of $6.14 in the same period compared to $4.78 a year ago.

For the current quarter, Fair Isaac is expected to report earnings per share of $6.38, representing a change of +12.7% from the prior-year quarter. The Zacks Consensus Estimate has remained unchanged over the past 30 days.

Fair Isaac carries a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Rating of F.

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