A month has gone by since the last earnings report for CDW (CDW). Shares have lost about 6.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is CDW due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

CDW's Q3 Earnings Miss Estimates

CDW reported third-quarter 2024 non-GAAP earnings per share (EPS) of $2.63, missing the Zacks Consensus Estimate of $2.84. Also, the bottom line fell 3.2% year over year.

The company’s revenues dipped 2% year over year to $5.517 billion. The downside reflects a challenging economic landscape that has led to slower customer decision-making on technology spending, dampened by soft sales in the Corporate and Public segments. However, growth in CDW’s UK and Canadian operations, along with strength in cloud and end-point solutions, has partially helped offset these declines. Quarterly revenues missed the consensus mark of $5.716 billion.

Separately, the company announced a quarterly dividend of 62.5 cents, which will be paid on Dec. 10, 2024, to shareholders on record as of Nov. 25.

Quarterly Details

Net sales of CDW’s Corporate segment amounted to $2.161 billion, declining 2.9% on a year-over-year basis.

The Small Business segment’s net sales of $380 million inched up 0.3% year over year.

The Public segment’s revenues totaled $2.336 billion, representing a 3.6% fall from the year-ago quarter. This was due to a 10.9% decrease in net sales to Government customers and a 3% decline in Education customers amid growth of 4.7% among Healthcare customers.

Net sales in Other (Canadian and U.K. operations) rose 6.4% to $640 million.

CDW’s gross profit of $1.201 billion decreased 2.2% on a year-over-year basis. Despite this decline, the gross profit margin remained flat at 21.8%.

The non-GAAP operating income declined 4% year over year to $534 million. The non-GAAP operating margin was down to 9.7% from 9.9%.

Selling and administrative expenses fell 4% year over year to $719 million due to reduced performance-based and equity-based compensation costs. 

Balance Sheet and Cash Flow

As of Sept. 30, 2024, CDW had $946.7 million of cash and cash equivalents compared with $440.7 million in the prior-year period.

The company has a long-term debt of $5.608 billion, lower than $5.662 billion in the previous year.

For the nine months that ended Sept. 30, 2024, CDW generated $932 million of cash flow from operating activities compared with $1.062 billion in the year-ago period.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

The consensus estimate has shifted -13.01% due to these changes.

VGM Scores

At this time, CDW has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise CDW has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

CDW belongs to the Zacks Computers - IT Services industry. Another stock from the same industry, Infosys (INFY), has gained 8.8% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.

Infosys reported revenues of $4.89 billion in the last reported quarter, representing a year-over-year change of +3.7%. EPS of $0.19 for the same period compares with $0.18 a year ago.

Infosys is expected to post earnings of $0.19 per share for the current quarter, representing a year-over-year change of +5.6%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

Infosys has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.

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