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Key Factors Likely to Impact CDW Corp's (CDW) Q3 Earnings

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CDW Corporation (CDW - Free Report) is scheduled to report third-quarter 2017 financial numbers on Nov 1, before the opening bell.

Last quarter, the company delivered in-line earnings. Notably, the company’s earnings surpassed the Zacks Consensus Estimate in two of the trailing four quarters, with an average beat of 4.16%.

Let’s see how things are shaping up prior to this announcement.

Expect What?

The Zacks Consensus Estimate for the quarter is pegged at $1.07 per share, reflecting a year-over-year increase of 10.3%. The Zacks Consensus Estimate for sales of $4 billion indicates around 7.9% growth from the prior-year quarter.

Factors to Consider

CDW specializes in offering information technology products and services to business, government, education and healthcare customers, primarily in the United Statesand Canada. Growth in customer channels and consistent strategic achievements are a couple of positive factors that are likely to drive performance in the to-be-reported quarter. Additionally, CDW’s robust product portfolio and product refreshes are positives.

The company’s approach to capture market share from existing and new customers, expand its solutions suite and enhance our services capabilities are likely to positively impact the to-be-reported quarter. Moreover, the company’s investment strategies to deliver integrated solutions both in and outside of the UK, along with international sales team and its international-branded website will drive positive results.

Q2 Earnings Highlight

The company reported modest second-quarter 2017 results, wherein the top line surpassed the Zacks Consensus Estimate and the bottom line matched the same. However, both the top line and bottom line increased on a year-over-year basis. Segmental revenues from Corporate increased 9.4% year over year, whilethose of Public were up 8.2%.

The Zacks Consensus Estimate for Corporate and Public is now pegged at $1.888 billion and $1.765 billion, respectively.

Aided by these factors, its shares have surged 54.9%in the last one year, outperforming the industry’s gain of 38.8%.

Challenges for the company

The company’s carrieshigh debt, which has been increasing for the past many years. As of Jun 30, 2017, the company had total debtofapproximately $3.3 billion, 1.7% higher year over year. Such high-debt levels increase leverage risk and interest costs which may dent the company’s margins.

Moreover, competition from Insight Enterprises Inc. (NSIT - Free Report) and PC Connection, Inc., and pricing pressure remain headwinds.

What the Zacks Model Unveils?

Our proven model does not conclusively show that CDW is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter. CDW currently carries a Zacks Rank #2 and has an ESP of -0.44%.

Stocks With Favorable Combination

Here are some other companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat:

NVIDIA Corporation (NVDA - Free Report) has an Earnings ESP of +0.53% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

AMTEK, Inc. (AME - Free Report) has an Earnings ESP of +0.18% and a Zacks Rank #3.

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