A month has gone by since the last earnings report for CDW (CDW Quick QuoteCDW - Free Report) . Shares have added about 4.7% in that time frame, outperforming the S&P 500.

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

CDW Corporation Q3 Earnings Top, Revenues Miss Estimates

CDW Corporation delivered impressive third-quarter 2021 results. The company’s third-quarter non-GAAP earnings improved 16.4% year over year to $2.13 per share and surpassed the Zacks Consensus Estimate by 3.9%.

This year-over-year increase in the bottom-line result was primarily driven by higher revenues, lower interest expenses and share repurchases. The aforementioned factors were partially offset by an increase in the effective tax rate to 23.9% from 22.7% in the year-ago quarter.

The company’s revenues increased 11.4% year over year to $5.30 billion. However, quarterly revenues missed the consensus mark of $5.34 billion.

On a constant currency basis, sales improved 10.7%. Currency impact on top-line growth was primarily driven by the favorable currency exchange rates of the Canadian dollar and the British pound to the U.S. dollar.

This was the second consecutive time that the company has recorded more than $5 billion of quarterly revenues.

A rebound in commercial customer spending resulted in excellent performance, especially in Corporate, Small Business and CDW Canada. The improvements in Education and Healthcare channels were key positives in the quarter.

Quarterly Details

Net sales of CDW’s Corporate segment amounted to $2.07 billion, reflecting a 24.5% jump on a year-over-year basis.

The Small Business segment’s net sales of $467.1 million grew 38.6% year over year.

Coming to the Public segment, net sales of $2.15 billion declined 6.1% from the year-earlier quarter. Revenues from Education and Healthcare customers were up 2.4% and 30.9% respectively, while the same from Government customers plunged 32.9%.

Net sales in Other (Canadian and UK operations) improved 31.4% to $611.7 million.

CDW’s gross profit of $914.9 million climbed 10.8% on a year-over-year basis. However, the gross margin contracted 10 basis points (bps) to 17.3%, mainly on a lower product margin, partially offset by a higher mix of net service contract revenues, primarily Software as a Service and improved net sales of professional services.

The non-GAAP operating income grew 12.6% year on year to $435.1 million. Additionally, the non-GAAP operating margin advanced 10 bps to 8.2%.

Selling and administrative expenses rose 4.1% year over year to $529 million primarily due to higher sales payroll expenses, increased coworker count and higher performance-based compensation.

Meanwhile, net interest expenses fell 10% year over year to $36 million on the benefits from the August 2020 senior notes refinancing, a lower effective interest rate on term loans and reduced borrowings under the revolving credit facility.

Balance Sheet and Cash Flow

CDW exited the third quarter with cash and cash equivalents of $245.1 million compared with $501.2 million witnessed at the end of June 2021 and $1.25 billion seen at the end of the year-earlier quarter.

The multi-brand IT solutions provider has a long-term debt of $4.04 billion, slightly higher than $3.91 billion at the end of the second quarter.

CDW generated $636.7 million of cash flow from operational activities during the first nine months of 2021.

Separately, the company announced that its board of directors has authorized a quarterly cash dividend of 50 cents per share to be payable on Dec 10 to the shareholders of record date as of Nov 24. The newly-approved dividend rate is 25% higher than its last quarter’s dividend rate of 40 cents per share.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

At this time, CDW has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, CDW has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.