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CDW Corporation (CDW - Free Report) reported better-than-expected results for third-quarter 2020. The company’s third-quarter non-GAAP earnings per share of $1.83 comfortably surpassed the Zacks Consensus Estimate of $1.48. Moreover, the reported figure increased 8%, year over year, mainly on improved product margin, better product mix, lower interest expenses and reduction in effective tax rate.
The company’s quarterly revenues of $4.76 billion outpaced the consensus mark of $4.54 billion. However, the top-line figure fell 3.1% year over year on a reported basis and decreased 3.3% on constant currency. Weakness in corporate demand due to the pandemic-induced economic and business disruptions primarily hurt CDW’s sales during the reported quarter.
Quarter in Detail
Net sales of CDW’s Corporate segment, amounting to $1.66 billion, witnessed a 13.2% decline on a year-over-year basis.
The Small Business segment’s net sales of $337 million dropped 12.7% year over year.
Coming to the Public segment, net sales of $2.29 billion climbed 9.2% from the year-earlier quarter. Moreover, revenues from Government and Education customers were up 6.8% and 33.6%, respectively. However, sales to Healthcare customers slid 26.5%.
Net sales in Other (Canadian and UK operations) were down 8.2% to $466 million.
CDW’s gross profit of $826 million inched up 1.1% on a year-over-year basis. Gross margin expanded 80 basis points (bps) to 17.4% on solid product margin and lower cost of goods sold.
Non-GAAP operating income grew 1.5% year over year to $386 million. Additionally, non-GAAP operating margin advanced 30 bps to 8.1% chiefly on higher gross margin, partially offset by inflated operating expenses.
Net interest expenses declined 5.1% year on year to $40 million.
Non-GAAP effective tax rate for the September-end quarter was 23.3%, lower than the year-ago quarter’s 25.8%.
Balance Sheet and Cash Flow
CDW exited the July-September quarter with cash and cash equivalents of $1.25 billion compared with the $958 million witnessed at the end of the previous quarter.
The company has a long-term debt of $3.92 billion compared with the prior quarter’s $4.13 billion.
CDW generated $738.4 million of cash flow from operational activities in the first nine months of 2020.
Zacks Rank and Other Stocks to Consider
CDW currently sports a Zacks Rank #1 (Strong Buy).
The long-term earnings growth rate for Zoom, Sapiens and STMicroelectronics is currently pegged at 25%, 5%, and 5%, respectively.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
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CDW Corp (CDW) Surpasses Q3 Earnings & Revenue Estimates
CDW Corporation (CDW - Free Report) reported better-than-expected results for third-quarter 2020. The company’s third-quarter non-GAAP earnings per share of $1.83 comfortably surpassed the Zacks Consensus Estimate of $1.48. Moreover, the reported figure increased 8%, year over year, mainly on improved product margin, better product mix, lower interest expenses and reduction in effective tax rate.
The company’s quarterly revenues of $4.76 billion outpaced the consensus mark of $4.54 billion. However, the top-line figure fell 3.1% year over year on a reported basis and decreased 3.3% on constant currency. Weakness in corporate demand due to the pandemic-induced economic and business disruptions primarily hurt CDW’s sales during the reported quarter.
Quarter in Detail
Net sales of CDW’s Corporate segment, amounting to $1.66 billion, witnessed a 13.2% decline on a year-over-year basis.
The Small Business segment’s net sales of $337 million dropped 12.7% year over year.
CDW Corporation Price, Consensus and EPS Surprise
CDW Corporation price-consensus-eps-surprise-chart | CDW Corporation Quote
Coming to the Public segment, net sales of $2.29 billion climbed 9.2% from the year-earlier quarter. Moreover, revenues from Government and Education customers were up 6.8% and 33.6%, respectively. However, sales to Healthcare customers slid 26.5%.
Net sales in Other (Canadian and UK operations) were down 8.2% to $466 million.
CDW’s gross profit of $826 million inched up 1.1% on a year-over-year basis. Gross margin expanded 80 basis points (bps) to 17.4% on solid product margin and lower cost of goods sold.
Non-GAAP operating income grew 1.5% year over year to $386 million. Additionally, non-GAAP operating margin advanced 30 bps to 8.1% chiefly on higher gross margin, partially offset by inflated operating expenses.
Net interest expenses declined 5.1% year on year to $40 million.
Non-GAAP effective tax rate for the September-end quarter was 23.3%, lower than the year-ago quarter’s 25.8%.
Balance Sheet and Cash Flow
CDW exited the July-September quarter with cash and cash equivalents of $1.25 billion compared with the $958 million witnessed at the end of the previous quarter.
The company has a long-term debt of $3.92 billion compared with the prior quarter’s $4.13 billion.
CDW generated $738.4 million of cash flow from operational activities in the first nine months of 2020.
Zacks Rank and Other Stocks to Consider
CDW currently sports a Zacks Rank #1 (Strong Buy).
Some other top-ranked stocks in the broader technology sector include Zoom Video Communications (ZM - Free Report) , Sapiens International Corporation N.V. (SPNS - Free Report) and STMicroelectronics N.V. (STM - Free Report) , all flaunting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The long-term earnings growth rate for Zoom, Sapiens and STMicroelectronics is currently pegged at 25%, 5%, and 5%, respectively.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce ""the world's first trillionaires,"" but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>