It has been about a month since the last earnings report for CDW (CDW Quick QuoteCDW - Free Report) . Shares have added about 2% in that time frame, underperforming 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 Q3 Earnings Surpass Estimates

CDW reported third-quarter 2023 non-GAAP earnings per share (EPS) of $2.72, beating the Zacks Consensus Estimate of $2.59. Also, the bottom line rose 4.4% year over year.

The company’s revenues decreased 9.4% year over year to $5.628 billion. Net sales decreased 9.9% at constant currency. The downtick was caused due to weakness across Corporate and Small Business segments. Also, quarterly revenues failed to beat the consensus mark of $5.824 billion.

Quarterly Details

Net sales of CDW’s Corporate segment amounted to $2.227 billion, declining 12.3% on a year-over-year basis.

The Small Business segment’s net sales of $378 million declined 21.7% year over year.

The Public segment’s net sales amounted to $2.422 billion, up 1.5% from the year-ago quarter. Revenues from Education customers rose 2.1%. Revenues from Healthcare increased 2.4%, while revenues from Government customers were flat.

Net sales in Other (Canadian and U.K. operations) declined 15.4% to $601 million.

CDW’s gross profit of $1.228 billion decreased 0.4% on a year-over-year basis. The gross margin expanded 200 basis points (bps) to 21.8% due to a higher product margin.

The non-GAAP operating income increased 1.3% year over year to $556 million. Additionally, the non-GAAP operating margin advanced 110 bps to 9.9%.

Selling and administrative expenses declined 2.3% year over year to $749 million, primarily due to reduced discretionary expenses.

Balance Sheet and Cash Flow

As of Sep 30, 2023, CDW had $440.7 million of cash and cash equivalents compared with $203.9 million as of Jun 30.

The company has a long-term debt of $5.66 billion, lower than $5.72 billion as of Jun 30, 2023.

For the nine months that ended Sep 30, 2023, CDW generated $1,062.2 million of cash flow from operating activities compared with $1,094 million in the year-ago period.

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, a grade with the same score on the momentum front. 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

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 belongs to the Zacks Computers - IT Services industry. Another stock from the same industry, ServiceNow (NOW Quick QuoteNOW - Free Report) , has gained 14.4% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.

ServiceNow reported revenues of $2.29 billion in the last reported quarter, representing a year-over-year change of +25%. EPS of $2.92 for the same period compares with $1.96 a year ago.

For the current quarter, ServiceNow is expected to post earnings of $2.78 per share, indicating a change of +21.9% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.8% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for ServiceNow. Also, the stock has a VGM Score of D.