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CDW Corporation (CDW) Q2 Earnings & Revenues Top Estimates

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CDW Corporation CDW delivered impressive second-quarter 2021 results. The company’s second-quarter non-GAAP earnings improved 29.5% year over year to $2.02 per share and surpassed the Zacks Consensus Estimate by 12.8%.

The year-over-year increase in bottom-line result was primarily driven by higher revenues, improved gross margin on better product mix, lower interest expenses and share repurchases. The aforementioned factors were partially offset by an increase in effective tax rate to 26.2% from 22.9% in the year-ago quarter.

The company reported revenues of $5.15 billion surpassing the consensus mark of $4.95 billion. The top line improved by 17.9% year over year on a reported basis and 16.3% on a constant currency basis.

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

Currency impact on the top-line growth was primarily driven by favorable currency exchange rates of the Canadian dollar and British pound to the US dollar.

This was the first-ever time that the company has recorded over $5 billion of quarterly revenues.

A rebound in commercial customer spending resulted in excellent performance, especially in Corporate, Small Business and CDW Canada. The improvements in Education and Healthcare channels were key positives of the quarter.

Quarterly backlog increased in the second quarter compared to the first quarter, reflecting impact from tight supply environment.

Quarterly Details

Net sales of CDW’s Corporate segment amounted to $1.98 billion, reflecting a 27.3% surge on a year-over-year basis.

The Small Business segment’s net sales of $482.9 million grew 59.8% year over year.

Coming to the Public segment, net sales of $2.08 billion grew 2.9% from the year-earlier quarter. Revenues from Education and Healthcare customers were up by 26.8% and 7% respectively, while the same from Government customers declined by 28.7%.

Net sales in Other (Canadian and UK operations) improved 23.8% to $599.5 million.

CDW’s gross profit of $883 million climbed 18.2% on a year-over-year basis. Gross margin expanded 10 basis points (bps) to 17.2% mainly driven by higher mix of net service contract revenues, primarily Software as a Service and increased net sales of professional services.

Non-GAAP operating income grew 23.6% year on year to $418 million. Additionally, non-GAAP operating margin advanced 40 bps to 8.1%.
Selling and administrative expenses rose 10.6% year over year to $513 million primarily due to higher sales payroll expenses, increased coworker count and higher performance-based compensation.

Meanwhile, net interest expenses fell 10.6% year over year to $36 million on account of the benefits from August 2020 senior notes refinancing, a lower effective interest rate on term loans and reduced borrowings under the revolving credit facility.

Balance Sheet and Cash Flow

CDW exited the second quarter with cash and cash equivalents of $501.2 million compared with $878.6 million witnessed at the end of March 2021 and $958.4 million seen at the end of year-earlier quarter.

The multi-brand IT solutions provider has a long-term debt of $3.91 billion, flat with the previous quarter.

CDW generated $344.9 million of cash flow from operational activities and $110 million of free cash flow during the first half of 2021.

Separately, the company announced that its board of directors has authorized a quarterly cash dividend of 40 cents per share to be payable on Sep 10 to the shareholders of record date as of Aug 25.

In the second quarter of 2021, the company has returned a total of $433 million to shareholders through $56 million of dividend payments and $377 million of share repurchases.

Zacks Rank and Key Picks

CDW currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector include:

Zovio Inc. ZVO has a Zacks Rank #1 (Strong-Buy) and a long-term earnings growth rate of 20%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Blucora BCOR has Zacks Rank #2 (Buy) and a long-term earnings growth rate of 15%.

Astronova ALOT has Zacks Rank #2 and a long-term earnings growth rate of 12%.

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