CDW Corp (CDW) Q2 Earnings & Revenues Top Estimates, Down Y/Y

CDW Corporation CDW reported better-than-expected results for second-quarter 2020.

The company’s second-quarter non-GAAP earnings per share of $1.56 surpassed the Zacks Consensus Estimate of $1.35. The reported figure, however, declined 2.6% year over year mainly on lower revenues.

The company’s quarterly revenues of $4.37 billion outpaced the consensus mark of $4.32 billion. However, the top-line figure fell 5.7% year over year on a reported basis and decreased 5.3% on constant currency. Weakness in corporate demand due to the pandemic-induced economic and business disruptions, along with unfavorable currency-exchange rates, mainly hurt CDW’s sales during the reported quarter.

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 $1.56 billion, registered a 17.3% decline on a year-over-year basis.

The Small Business segment’s net sales of $302 million dropped 19.9% year over year.

Coming to the Public segment, net sales of $2.02 billion climbed 9.9% from the year-earlier quarter. Moreover, revenues from Government and Education customers were up 24.4% and 13.3%, respectively. However, sales to Healthcare customers slid 12.8%.

Net sales in Other (Canadian and UK operations) were down 8.4% to $484 million.

CDW’s gross profit of $747 million dipped 3.4% on a year-over-year basis. Yet, gross margin expanded 40 basis points (bps) to 17.1% on solid product margin and lower cost of goods sold.

Non-GAAP operating income fell 5.6% year over year to $338 million. However, non-GAAP operating margin remained flat at 7.7%.

Effective tax rate for the June-end quarter was 22.9%, lower than the year-ago quarter’s 24.7%.

Balance Sheet and Cash Flow

CDW exited the April-June quarter with cash and cash equivalents of $958 million compared with the $214 million witnessed at the end of the previous quarter.

The company has a long-term debt of $4.13 billion compared with the prior quarter’s $3.56 billion.

CDW generated $515.8 million of cash flow from operational activities in the first-half of 2020.

Zacks Rank and Key Picks

Currently, CDW carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader technology sector include Benefitfocus BNFT, Cogent Communications Holdings CCOI and Synaptics SYNA, all carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term earnings growth rate for Benefitfocus, Cogent and Synaptics is currently pegged at 30%, 10.6%, and 10%, respectively.

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