It has been about a month since the last earnings report for CDW (CDW Quick QuoteCDW - Free Report) . Shares have added about 5.8% 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 drivers.

CDW's Q1 Earnings & Revenues Surpass Estimates

CDW reported first-quarter 2023 non-GAAP earnings of $2.03 per share, beating the Zacks Consensus Estimate of $2.01. However, it fell year over year by 7.9%.

The company’s revenues decreased 14.2% year over year to $5.103 billion. Net sales decreased 14.7% at constant currency. The downtick was caused due to weakness across all business segments. Also, weakening IT spending owing to rising economic uncertainty was a major concern. However, quarterly revenues beat the consensus mark by 0.03%

Quarterly Details

Net sales of CDW’s Corporate segment amounted to $2.204 billion, declining 17.4% on a year-over-year basis.

The Small Business segment’s net sales of $411 million declined 22.7% year over year.

The Public segment’s net sales amounted to $1.813 billion, down 12.2% from the year-earlier quarter. Revenues from Education customers dropped 27.4%. Revenues from Healthcare and Government customers were unchanged from the previous year’s quarter.

Net sales in Other (Canadian and U.K. operations) declined 13.1% to $675 million.

CDW’s gross profit of $1.089 million decreased 1.3% on a year-over-year basis. The gross margin expanded 270 basis points (bps) to 21.3%, mainly due to a favorable product mix and rate.

The non-GAAP operating income decreased 6% year over year to $434 million. Additionally, the non-GAAP operating margin advanced 70 bps to 8.5%.

Selling and administrative expenses rose 2.4% year over year to $734 million, primarily due to higher sales payroll expenses, increased coworker count and other expenses due to transformation initiatives.

Balance Sheet and Cash Flow

As of Mar 31, 2023, CDW had $279.4 million of cash and cash equivalents compared with $315.2 million as of Dec 31, 2022.

The company has a long-term debt of $5.75 billion, lower than $5.87 billion as of Dec 31, 2022.

For the year that ended on Mar 31, 2023, CDW generated $365.4 million of cash flow from operating activities compared with $380.8 million in the comparable period in the prior fiscal

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

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 top 40% 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

CDW has a Zacks Rank #4 (Sell). We expect a below average 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, Check Point Software (CHKP Quick QuoteCHKP - Free Report) , a stock from the same industry, has gained 4.8%. The company reported its results for the quarter ended March 2023 more than a month ago.

Check Point reported revenues of $566.2 million in the last reported quarter, representing a year-over-year change of +4.3%. EPS of $1.80 for the same period compares with $1.57 a year ago.

For the current quarter, Check Point is expected to post earnings of $1.89 per share, indicating a change of +15.2% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.2% over the last 30 days.

Check Point has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.