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Why Is CDW (CDW) Down 5.3% Since Last Earnings Report?

A month has gone by since the last earnings report for CDW (CDW). Shares have lost about 5.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is CDW due for a breakout? 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 Q2 Earnings Top Estimates

CDW reported second-quarter 2022 non-GAAP earnings of  $2.49 per share, beating the Zacks Consensus Estimate of $2.40 and increasing 23% year over year.

The company’s revenues increased 19.4% year over year to $6.146 billion. On a constant-currency basis, net sales increased 20.5%. The performance was driven by strength across all segments and the contribution from the Sirius Computer acquisition. However, quarterly revenues missed the consensus mark of $6.155 billion. Unfavorable currency translations acted as a dampener.

Quarterly Details

Net sales of CDW’s Corporate segment amounted to $2.661 billion, rising 34.2% on a year-over-year basis.

The Small Business segment’s net sales of $500 million rose 3.5% year over year.

In the Public segment, net sales amounted to $2.243 billion. The figure rose 7.8% from the year-earlier quarter’s levels. Revenues from Healthcare and Government customers were up 30.1% and 18.7%, respectively. Revenues from Education customers dropped 6.4%.

Net sales in Other (Canadian and U.K. operations) increased 23.8% to $742 million.

CDW’s gross profit of $1.168 million rallied 32.3% on a year-over-year basis. The gross margin expanded 180 basis points (bps) to 19%, mainly on a favorable product mix and rate.

The non-GAAP operating income increased 23.5% year over year to $516.3 million. Additionally, the non-GAAP operating margin advanced 30 bps to 8.4%.

Selling and administrative expenses rose 42.9% year over year to $732.9 million, primarily due to higher sales payroll expenses, increased coworker count and higher acquisition and integration costs.

Balance Sheet and Cash Flow

As of Jun 30, 2022, CDW had $541.6 million of cash and cash equivalents compared with $386.9 million as of Mar 31, 2022.

The company has a long-term debt of $6.481 billion, lower than $6.515 billion as of Mar 31, 2022.

For six months ended Jun 30, 2022, CDW generated $761.1 million of cash flow from operating activities compared with $344.9 billion in the comparable period in the prior fiscal.

How Have Estimates Been Moving Since Then?

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

VGM Scores

At this time, CDW has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. 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 B. 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. It comes with little surprise CDW has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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