CDW Corporation (NASDAQ:CDW) just released its latest quarterly results and things are looking bullish. Results were good overall, with revenues beating analyst predictions by 4.0% to hit US$4.8b. Statutory earnings per share (EPS) came in at US$1.33, some 9.2% above whatthe analysts had expected. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.
Taking into account the latest results, the consensus forecast from CDW's ten analysts is for revenues of US$18.6b in 2021, which would reflect a reasonable 2.8% improvement in sales compared to the last 12 months. Per-share earnings are expected to rise 5.4% to US$5.43. In the lead-up to this report, the analysts had been modelling revenues of US$18.5b and earnings per share (EPS) of US$5.25 in 2021. So the consensus seems to have become somewhat more optimistic on CDW's earnings potential following these results.
There's been no major changes to the consensus price target of US$137, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. Currently, the most bullish analyst values CDW at US$150 per share, while the most bearish prices it at US$120. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.
Of course, another way to look at these forecasts is to place them into context against the industry itself. It's pretty clear that there is an expectation that CDW's revenue growth will slow down substantially, with revenues next year expected to grow 2.8%, compared to a historical growth rate of 7.7% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 7.7% per year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than CDW.
The Bottom Line
The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards CDW following these results. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that CDW's revenues are expected to perform worse than the wider industry. The consensus price target held steady at US$137, with the latest estimates not enough to have an impact on their price targets.
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 still need to take note of risks, for example - CDW has 1 warning sign we think you should be aware of.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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