CDW Corporation CDW is slated to report fourth-quarter 2024 results on Feb. 05, before market open.

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The Zacks Consensus Estimate for revenues is $4.96 billion, suggesting a 1.2% decline from the year-ago quarter’s reported figure.

The consensus estimate for earnings is pegged at $2.33 per share, unchanged in the past 60 days, indicating a decrease of 9.3% from the year-ago quarter’s reported figure.

CDW’s earnings missed the Zacks Consensus Estimate in three of the last four quarters and matched in one, with the average negative surprise being 4.7%.

Factors at Play for CDW

The ongoing challenges in the hardware market due to cautious spending behaviors, extending decision-making timelines and delaying projects remain an overhang on CDW’s performance.  Though international business showcases strength, management anticipates continued volatility as customers deal with the challenges of economic and political uncertainty. Management expects results to be influenced by both market trends and CDW-specific factors, with gross profit growth under pressure due to the mix of hardware sales and the ongoing market cycles. 

CDW expects a low single-digit decline in gross profit for 2024. This suggests slightly weaker seasonality in the fourth quarter. We expect fourth-quarter gross profit to be $1,069.8 million, down 7.3% year over year. Second-half gross profit and net sales are also likely to be lower than usual. It expects 2024 gross margin to match 2023 levels. Traditionally, the fourth quarter sees a sharp decline compared to the third quarter, mainly due to seasonally reduced demand from education and government customers. However, this time, CDW does not expect the decline to be offset by seasonal strength in demand from corporate and small business customers.

Management also expects full-year non-GAAP earnings per share to decline by a mid-single-digit percentage compared to the prior-year figure.

CDW Corporation Price and EPS Surprise

CDW Corporation price-eps-surprise | CDW Corporation Quote

Nonetheless, strengthening demand for cloud and security solutions is likely to have cushioned the top-line growth. Security and cloud revenues are likely to have been driven as customers spending priorities include cost optimization, data protection and workforce productivity. CDW remains focused on expanding its cloud and SaaS business to sustain revenue growth amid challenges in the hardware sector.

Strong demand for consumer devices like Notebooks and Chromebooks coupled with steady growth in software and services is likely to have acted as another tailwind. We expect revenues from Notebooks/Mobile Devices to be $1,175.3 million, up 9.2% year over year. Our estimate for Software and Services revenues is currently pegged at $886.6 million and $429.8 million, respectively.  Expanding workloads and surging data, rising security threats, aging client devices and the solid uptake of AI-powered tools and applications are likely to have driven growth against a volatile macroeconomic landscape.

In the third quarter, revenues from Corporate, Public, Education and Government declined 2.9%, 3.6%, 3% and 10.9%, respectively, while Small Business and Healthcare went up 0.3% and 4.7%. For the fourth quarter, we expect revenues from Corporate, Small Business and Healthcare to be $2089.3 million, $358.6 million and $515.1 million, down 8.6%, 3.1% and 3.9%, respectively. Revenues from the Education sector are estimated to be up 18.6% to $686.5 million.

Key Recent Development

In December 2024, CDW acquired Mission Cloud Services Inc., a top provider of AWS-focused professional services, managed services and consulting. This acquisition aligns perfectly with CDW’s three-part growth strategy, enhancing its ability to deliver customer-centric solutions across the entire technology stack and lifecycle. With this acquisition, CDW now boasts an impressive 17 AWS Competencies, solidifying its foothold as an AWS Premier Tier Partner.

What Our Model Says for CDW

Our proven model does not predict an earnings beat for CDW this time around. The combination of a positive  Earnings ESP  and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case here.

CDW currently has an Earnings ESP of 0.00% and a Zacks Rank #3. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Stocks With Favorable Combination

Here are a few stocks that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this season.

QUALCOMM Incorporated QCOM currently has an Earnings ESP of +3.34% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

QCOM is scheduled to report quarterly earnings on Feb. 5. The Zacks Consensus Estimate for QCOM’s to-be-reported quarter’s earnings and revenues is pegged at $2.93 per share and $10.92 billion, respectively. Shares of QCOM have gained 15.8% in the past year.

Amazon.com, Inc. AMZN has an Earnings ESP of +4.78% and a Zacks Rank #2 at present. AMZN is scheduled to report quarterly figures on Feb. 6. The Zacks Consensus Estimate for AMZN’s to-be-reported quarter’s earnings and revenues is pegged at $1.52 per share and $187.28 billion, respectively. Shares of AMZN have surged 51.2% in the past year.

Airbnb ABNB has an Earnings ESP of +38.46% and a Zacks Rank #3 at present. Airbnb is set to report its fourth-quarter 2024 results on Feb. 13. The Zacks Consensus Estimate for ABNB’s to-be-reported quarter’s earnings and revenues is pegged at 63 cents per share and $2.42 billion, respectively. ABNB shares have lost 10.1% in the trailing 12 months.

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