As you might know, CDW Corporation (NASDAQ:CDW) recently reported its full-year numbers. The result was positive overall - although revenues of US$18b were in line with what analysts predicted, CDW surprised by delivering a statutory profit of US$4.99 per share, modestly greater than expected. Analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. So we collected the latest post-earnings statutory consensus estimates to see what could be in store for next year.
Taking into account the latest results, the latest consensus from CDW's ten analysts is for revenues of US$19.1b in 2020, which would reflect an okay 6.1% improvement in sales compared to the last 12 months. Statutory earnings per share are expected to step up 10% to US$5.60. Before this earnings report, analysts had been forecasting revenues of US$18.9b and earnings per share (EPS) of US$5.40 in 2020. So the consensus seems to have become somewhat more optimistic on CDW's earnings potential following these results.
The consensus price target was unchanged at US$139, implying that the improved earnings outlook is not expected to have a long term impact on value creation for shareholders. The consensus price target just an average of individual analyst targets, so - considering that the price target changed, it would be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values CDW at US$155 per share, while the most bearish prices it at US$120. Still, with such a tight range of estimates, it suggests analysts have a pretty good idea of what they think the company is worth.
Another way to assess these estimates is by comparing them to past performance, and seeing whether analysts are more or less bullish relative to other companies in the market. It's pretty clear that analysts expect CDW's revenue growth will slow down substantially, with revenues next year expected to grow 6.1%, compared to a historical growth rate of 7.8% over the past five years. Juxtapose this against the other companies in the market with analyst coverage, which are forecast to grow their revenues (in aggregate) 5.3% next year. So it's pretty clear that, while CDW's revenue growth is expected to slow, it's expected to grow roughly in line with the industry.
The Bottom Line
The biggest takeaway for us from these new estimates is that the consensus upgraded its earnings per share estimates, showing a clear improvement in sentiment around CDW's earnings potential next year. They also reconfirmed their revenue estimates, with the company predicted to grow at about the same rate as the wider market. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
With that in mind, we wouldn't be too quick to come to a conclusion on CDW. Long-term earnings power is much more important than next year's profits. We have estimates - from multiple CDW analysts - going out to 2022, and you can see them free on our platform here.
You can also see whether CDW is carrying too much debt, and whether its balance sheet is healthy, for free on our platform here.
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