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CDW (CDW) Up 2.9% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for CDW (CDW - Free Report) . Shares have added about 2.9% 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 its most recent earnings report in order to get a better handle on the important catalysts.

CDW Corporation Q1 Earnings Top Estimates

CDW Corporation reported first-quarter 2022 non-GAAP earnings of  $2.20 per share, beating the Zacks Consensus Estimate by 10% and increasing 26.6% year over year.

The company’s revenues increased 23% year over year to $5.95 billion. Quarterly revenues also surpassed the consensus mark by 5.2%. On a constant currency basis, net sales improved by 23.3%.

Quarterly Details

Net sales of CDW’s Corporate segment amounted to $2.628 billion, rising 45.5% on a year-over-year basis.

The Small Business segment’s net sales of $524 million rose 21.1% year over year.

Coming to the Public segment, net sales amounted to $2.033 billion. The figure rose 5.8% from the year-earlier quarter’s levels. Revenues from Healthcare and Government customers were up 26.8% and 5.4%, respectively. Revenues from Education customers dropped 4.3%.

Net sales in Other (Canadian and U.K. operations) increased 12.8% to $765 million.

CDW’s gross profit of $1.104 million rallied 38.8% on a year-over-year basis. However, the gross margin expanded 220 basis points (bps) to 18.6%, mainly on a favorable product mix and rate.

The non-GAAP operating income increased 25.7% year over year to $462 million. Additionally, the non-GAAP operating margin advanced 20 bps to 7.8%.

Selling and administrative expenses rose 52% year over year to $717.2 million, primarily due to higher sales payroll expenses, increased coworker count and higher acquisition and integration costs.

Balance Sheet and Cash Flow

As of Mar 31, 2022, CDW had $386.9 million of cash and cash equivalents compared with $258.1 million as of Dec 31, 2021.

The company has a long-term debt of $6.51 billion, lower than $6.76 billion as of Dec 31, 2021.

CDW generated $380.8 million of cash flow from operating activities compared with $344.6 billion in the prior-year quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, CDW has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

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

Outlook

Estimates have been 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.

Performance of an Industry Player

CDW is part of the Zacks Computers - IT Services industry. Over the past month, ServiceNow (NOW - Free Report) , a stock from the same industry, has gained 7.6%. The company reported its results for the quarter ended March 2022 more than a month ago.

ServiceNow reported revenues of $1.72 billion in the last reported quarter, representing a year-over-year change of +26.6%. EPS of $1.73 for the same period compares with $1.52 a year ago.

ServiceNow is expected to post earnings of $1.54 per share for the current quarter, representing a year-over-year change of +8.5%. Over the last 30 days, the Zacks Consensus Estimate has changed -28.8%.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for ServiceNow. Also, the stock has a VGM Score of D.


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