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CDW Corp (CDW) Q4 Earnings & Revenues Top Estimates, Up Y/Y

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Zacks Equity Research
·4 min read
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CDW Corporation CDW reported better-than-anticipated results for fourth-quarter 2020. The company’s fourth-quarter non-GAAP earnings per share of $1.82 comfortably surpassed the Zacks Consensus Estimate of $1.53.

Moreover, the reported figure increased 16.1% year over year, mainly on higher revenues, improved product margin, better product mix, lower interest expenses and reduction in effective tax rate.

The company’s quarterly revenues of $4.96 billion outpaced the consensus mark of $4.54 billion. The top-line figure also increased 9.2% year over year on a reported basis and 11% on constant currency.

Higher sales to education and government customers more than offset the weakness in corporate, small businesses, and healthcare demand due to the pandemic-induced economic and business disruptions.

CDW Corporation Price, Consensus and EPS Surprise

CDW Corporation Price, Consensus and EPS Surprise
CDW Corporation Price, Consensus and EPS Surprise

CDW Corporation price-consensus-eps-surprise-chart | CDW Corporation Quote

Quarter in Detail

Net sales of CDW’s Corporate segment, amounting to $1.72 billion, witnessed an 11.2% decline on a year-over-year basis.

The Small Business segment’s net sales of $367 million dropped 4.8% year over year.

Coming to the Public segment, net sales of $2.30 billion jumped 46.5% from the year-earlier quarter. Moreover, revenues from Government and Education customers were up 29.9% and 142.3%, respectively. However, sales to Healthcare customers slid 13.8%.

Net sales in Other (Canadian and UK operations) edged down 0.4% to $576 million.

CDW’s gross profit of $881 million climbed 13.3% on a year-over-year basis. Gross margin expanded 70 basis points (bps) to 17.8% on solid product margin and lower cost of goods sold.

Non-GAAP operating income grew 9.9% year on year to $376 million. Additionally, non-GAAP operating margin advanced 10 bps to 7.6%, chiefly on higher gross margin, partially offset by inflated operating expenses.

Net interest expenses declined 2.9% year on year to $37 million.

Non-GAAP effective tax rate for the December-end quarter was 19.2%, lower than the year-ago quarter’s 21.4%.

Balance Sheet and Cash Flow

CDW exited 2020 with cash and cash equivalents of $1.41 billion compared with the $154 million witnessed at the end of 2019.

The company has a long-term debt of $3.86 billion compared with the prior year’s $3.28 billion.

CDW generated $1.31 billion of cash flow from operational activities in 2020.

Separately, CDW announced that its board of directors has authorized an increase of $1.25 billion to the company’s share-repurchase program and approved a quarterly cash dividend of 40 cents per share.

The $1.25-billion authorization is incremental to the company’s $338 million unused amount to the share-repurchase program as of Dec 31, 2020.

Furthermore, the company noted that the dividend rate has increased more than nine-fold since its IPO in June 2013. Since then, the company has returned more than $3.4 billion to shareholders through dividend payments.

Zacks Rank and Other Key Picks

CDW currently carries a Zacks Rank #2 (Buy).

Other top-ranked stocks in the broader technology sector include Shopify SHOP, Zoom Video Communications ZM and Apple AAPL, all flaunting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The long-term earnings growth rate for Shopify, Zoom and Apple is currently pegged at 32.5%, 25% and 11.5%, respectively.

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