A month has gone by since the last earnings report for CDW (CDW Quick QuoteCDW - Free Report) . Shares have added about 6% 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 Q2 Earnings Surpass Estimates

CDW reported second-quarter 2023 non-GAAP earnings per share (EPS) of $2.56, beating the Zacks Consensus Estimate of $2.34. However, the bottom line rose 3.2% year over year.

The company’s revenues decreased 8.5% year over year to $5.626 billion. Net sales decreased 8.2% at constant currency. The downtick was caused due to weakness across Corporate and Small Business segments. However, quarterly revenues beat the consensus mark of $5.404 billion.

Quarterly Details

Net sales of CDW’s Corporate segment amounted to $2.245 billion, declining 15.6% on a year-over-year basis.

The Small Business segment’s net sales of $396 million declined 20.8% year over year.

The Public segment’s net sales amounted to $2.295 billion, up 2.3% from the year-earlier quarter. Revenues from Education customers dropped 1.4%. Revenues from Healthcare were down 0.9%, while revenues from Government customers were up 11.8%.

Net sales in Other (Canadian and U.K. operations) declined 7% to $690 million.

CDW’s gross profit of $1.182 billion increased 1.1% on a year-over-year basis. The gross margin expanded 200 basis points (bps) to 21% due to a favorable product mix and rate.

The non-GAAP operating income increased 2.6% year over year to $530 million. Additionally, the non-GAAP operating margin advanced 100 bps to 9.4%.

Selling and administrative expenses rose 5% year over year to $769 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 Jun 30, 2023, CDW had $203.9 million of cash and cash equivalents compared with $279.4 million as of Mar 31, 2023.

The company has a long-term debt of $5.72 billion, lower than $5.75 billion as of Mar 31, 2023.

For the six months that ended Jun 30, 2023, CDW generated $593.6 million of cash flow from operating activities compared with $761.1 million at the comparable period in the prior fiscal.

How Have Estimates Been Moving Since Then?

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

VGM Scores

Currently, CDW has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. However, 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 B. 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 Quick QuoteNOW - Free Report) , a stock from the same industry, has gained 5.1%. The company reported its results for the quarter ended June 2023 more than a month ago.

ServiceNow reported revenues of $2.15 billion in the last reported quarter, representing a year-over-year change of +22.7%. EPS of $2.37 for the same period compares with $1.62 a year ago.

ServiceNow is expected to post earnings of $2.54 per share for the current quarter, representing a year-over-year change of +29.6%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.2%.

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 C.