Core Insights - CDW Corporation, based in Vernon Hills, Illinois, specializes in IT solutions with a market cap of $15.3 billion, offering a range of products including hardware, software, cloud computing, and security solutions [1][2] Company Overview - CDW is classified as a large-cap stock due to its market capitalization exceeding $10 billion, highlighting its significant influence in the IT services industry [2] - The company boasts a diversified portfolio of IT solutions, strong vendor relationships, and a culture that fosters innovation and adaptability [2] Stock Performance - CDW's stock has experienced a decline of 38.2% from its 52-week high of $192.30, reached on May 14, 2025, and has fallen 20.7% over the past three months, underperforming the Technology Select Sector SPDR Fund (XLK) [3] - Year-to-date, CDW shares are down 12.7% and have decreased 28.4% over the past 52 weeks, significantly lagging behind XLK's performance [5] - The stock has been trading below its 50-day and 200-day moving averages since late July 2025, indicating a bearish trend [5] Recent Financial Results - On February 4, CDW reported Q4 results with an adjusted EPS of $2.57, surpassing Wall Street's expectation of $2.44, and revenue of $5.5 billion, exceeding forecasts of $5.3 billion [7] Analyst Sentiment - Wall Street analysts maintain a "Moderate Buy" consensus rating for CDW, with a mean price target of $167.40, suggesting a potential upside of 40.8% from current levels [8]

Core Viewpoint - CDW's recent earnings report shows a mixed performance, with a notable earnings beat but a decline in share price, raising questions about future performance leading up to the next earnings release [1]. Financial Performance - CDW reported Q4 2025 non-GAAP EPS of $2.57, exceeding the Zacks Consensus Estimate of $2.44, marking a 3.8% year-over-year increase [2]. - Net sales for Q4 reached $5.51 billion, reflecting a 6.3% year-over-year increase, driven by strong customer spending in software, notebooks, mobile devices, and services [3]. - For the full year 2025, net sales rose 6.8% year over year to $22.4 billion, with approximately $982 million returned to shareholders through dividends and share repurchases [4]. Segment Performance - The Corporate segment's net sales were $2.37 billion, down 0.6% year-over-year, indicating caution among large enterprise customers [6]. - The Small Business segment saw net sales of $457 million, an 18.4% increase year-over-year, suggesting improved investment activity among SMB customers [6]. - The Public segment's revenues totaled $2.02 billion, up 7% year-over-year, with the Education sector leading growth at 12.9% [7]. Margin Analysis - Gross profit increased 8.6% year-over-year to $1.25 billion, with gross margin expanding to 22.8% from 22.3% [8]. - Selling and administrative expenses rose 10.3% to $824 million, leading to a slower growth rate in operating income, which increased 0.6% year-over-year to $502 million [9]. Balance Sheet and Cash Flow - As of December 31, 2025, CDW had $618.7 million in cash and cash equivalents, up from $452.9 million as of September 30, 2025 [11]. - The company generated $1.2 billion in cash flow from operating activities for the year, with free cash flow at $1.1 billion [11]. Future Outlook - CDW reaffirmed its long-term growth ambition, targeting 200–300 basis points of growth above the U.S. IT addressable market in 2026, driven by demand across hardware, software, services, and AI-related guidance [5]. - Estimates for CDW have been trending upward since the earnings release, with a Zacks Rank of 3 (Hold), indicating expectations for an in-line return in the coming months [12][14]. Industry Comparison - CDW operates within the Zacks Computers - IT Services industry, where ServiceNow has recently reported a 20.7% year-over-year revenue increase, highlighting competitive dynamics in the sector [15].

Group 1 - CDW Corporation is recognized as one of the top information technology services stocks to consider for investment at present [1] - The company filed for an automatic mixed securities shelf registration on February 23, allowing it to issue multiple securities for capital raising to support operations and growth [1][6] - In Q4 2025, CDW reported adjusted earnings per share of $2.57, exceeding the estimate of $2.44, and revenue of $5.51 billion, surpassing the estimate of $5.32 billion by $179 million [2] Group 2 - For 2026, CDW plans to return 50% to 75% of adjusted free cash flow to shareholders through dividends and share repurchases, with gross profit expected to grow in the low single digits and modest margin expansion forecasted [3] - The company remains active in the M&A market, indicating a strategic focus on growth through acquisitions [3] - Among analysts covering CDW, 57% rate it a Buy and 43% rate it a Hold, with an average price target of $166, suggesting an upside potential of over 33% [3] Group 3 - CDW provides IT solutions across the U.S., U.K., and Canada, offering a range of hardware and software products and services, including on-premises and cloud capabilities [4]

Group 1 - The Morgan Stanley TMT Conference is being held, with Erik Woodring leading the hardware research coverage [1] - Al Miralles, CFO of CDW, is participating in the conference, indicating the company's ongoing presence in the industry [1]

CDW Conference Call Summary Company Overview - **Company**: CDW (NasdaqGS:CDW) - **Event**: Morgan Stanley TMT Conference - **Date**: March 02, 2026 Key Points Industry and Market Context - **Post-COVID Recovery**: The company faced challenges in 2023 and 2024 due to macroeconomic factors, elongated decision-making, and funding cycles in the public sector, leading to a temporary slowdown in growth [4][6] - **2025 Growth**: CDW experienced a sustainable return to growth in 2025, taking advantage of market share opportunities and executing effectively [4][6] Customer Insights - **Customer Sentiment**: Customers are described as cautious and intentional with their spending, prioritizing budgets without cutting them [13] - **Focus Areas**: Corporate customers are particularly focused on AI infrastructure, while small businesses have shown resilience and adaptability, focusing on security, cloud, and client devices [15][18] - **Public Sector Dynamics**: The public sector has been uneven, with state and local governments performing well, while federal funding has been choppier due to shutdowns and funding cycles [18][30] Sector Performance - **Healthcare**: The healthcare sector has been a strong performer, with expectations for continued growth as investments in verticalization pay off [15][32] - **Education**: Education spending is expected to surpass pre-pandemic levels, with positive growth anticipated in 2026 [20] - **International Business**: The international segment has shown resilience, with consistent performance across regions like the U.K., Europe, and Canada [34] Product and Infrastructure Outlook - **PC Demand**: There remains significant demand for PCs, driven by Windows 11 refresh cycles and AI-related interests, although supply constraints may impact the second half of the year [40][43] - **Enterprise Infrastructure**: Infrastructure spending has been delayed, but there is growing interest in aligning capacity to support AI, indicating a potential inflection point in spending [48][49] AI and Technology Integration - **AI as an Enabler**: CDW positions itself as an enabler of AI, with increasing customer interest in AI workloads and infrastructure support [51][56] - **Hybrid Environments**: Corporates are contemplating hybrid environments to manage costs effectively, balancing on-premise and cloud solutions [60][61] Financial Performance and Projections - **Netted Down Revenue**: The trend of netted down revenues is expected to persist, contributing significantly to gross profit, with a current contribution of 36% [70][74] - **Operating Expenses**: CDW aims to achieve operating leverage through structural savings and reinvestment, with modest growth projections for 2026 [85][89] Capital Allocation Strategy - **Share Buybacks**: The company plans to lean into buybacks, viewing its stock as attractive, while also considering M&A opportunities [90][92] - **Cash Flow Management**: CDW emphasizes its cash flow-oriented nature, focusing on disciplined working capital management to support capital allocation strategies [94] Market Perception - **Investor Awareness**: The company seeks to remind investors of its scale, sophistication, and the importance of its role as a trusted advisor in a dynamic market environment [93][94] Additional Insights - **Execution and Adaptability**: CDW's ability to navigate supply chain challenges and maintain customer engagement is highlighted as a key strength [94] - **Future Growth Potential**: The company expresses optimism about future growth opportunities, particularly in AI and infrastructure sectors, while remaining cautious about market conditions [56][89]

Core Insights - Madison Investments reported a 3.43% appreciation for the Madison Large Cap Fund in Q4 2025, outperforming the S&P 500's 2.65% return [1] - The S&P 500 achieved a full-year return of 17.9% for 2025, with a three-year annual growth rate exceeding 21% [1] - Market leadership was characterized by High Beta and Momentum factors, with notable improvements in Healthcare, Financials, and Consumer Discretionary sectors [1] Company Summary: CDW Corporation - CDW Corporation, an IT solutions company, had a market capitalization of $16.138 billion and closed at $123.13 per share on February 23, 2026 [2][4] - The stock experienced a one-month return of -3.35% and a 52-week decline of 34.05% [2] - In Q4 2025, CDW reported consolidated net sales of $5.5 billion, reflecting a 5% increase from Q4 2024 [4] Performance Analysis - CDW Corporation was listed among the bottom five detractors for the Madison Large Cap Fund in Q4 2025, with revenue growth improving but operating expenses rising faster, leading to muted earnings growth [3] - Despite the challenges, there is a belief that expenses will stabilize, allowing for a rebound in earnings growth in the long term [3] - CDW Corporation was included in 57 hedge fund portfolios at the end of Q4 2025, an increase from 48 in the previous quarter [4]

Financial Performance - In 2025, CDW generated net sales of $22.4 billion, a 6.8% increase from $21.0 billion in 2024[47] - Net sales for the year ended December 31, 2025, totaled $22,424.1 million, representing a 6.8% increase from $20,998.7 million in 2024[202] - Gross profit for 2025 rose by $271 million, or 5.9%, with a gross profit margin of 21.7%, a decrease of 20 basis points from the previous year[176] - Total gross profit for the year ended December 31, 2025, was $4,873.4 million, a 5.9% increase from $4,602.4 million in 2024[180] - Operating income for 2025 was $1,655.6 million, reflecting a slight increase of 0.3% compared to 2024, with an operating income margin of 7.4%[174] - Operating income for the year ended December 31, 2025, increased by $4 million, or 0.3%, to $1,656 million compared to $1,651 million for 2024[177] - Non-GAAP net income for 2025 was $1,323.0 million, compared to $1,287.2 million in 2024, with non-GAAP net income per diluted share increasing to $10.02 from $9.52[170] - Non-GAAP operating income for 2025 was $1,996.7 million, or 8.9% of net sales, compared to $1,947.0 million, or 9.3% of net sales in 2024[199] - Free cash flow for 2025 was $1,088.1 million, down from $1,154.7 million in 2024, indicating a decrease of 5.7%[203] Sales Breakdown - The US business accounted for approximately 90% of net sales, with five dedicated customer channels each generating over $1.7 billion in net sales[29] - CDW's net sales from hardware amounted to $16.1 billion, representing 71.6% of total net sales in 2025[47] - Net sales from software reached $4.2 billion, accounting for 18.7% of total net sales in 2025[47] - Corporate segment net sales increased by $605 million, or 6.8%, driven by higher customer demand in software and hardware products[186] - Small Business segment net sales rose by $203 million, or 13.3%, primarily due to increased demand for notebooks/mobile devices and software[188] - Public segment net sales increased by $378 million, or 4.6%, attributed to higher demand in software and services across various customer channels[190] - Other segment net sales increased by $240 million, or 9.7%, driven by growth in notebooks/mobile devices and services within UK and Canada operations[192] Operational Insights - The company operates two distribution centers in North America and one in the UK, handling approximately 22 million units annually[35] - Drop-shipment arrangements represented about 51% of total North America net sales in 2025[36] - The company has approximately 14,800 coworkers globally, with 11,200 in the US and 3,600 internationally[51] - Over 50% of US net sales are generated by account managers with more than seven years of tenure[51] - The company maintains a diverse solutions portfolio with over 100,000 products and services from more than 1,000 brands, delivered through approximately 10,500 customer-facing employees[165] Strategic Initiatives - The company plans to realign its customer-facing organization into three reportable segments: Commercial, Government, and Education, effective January 1, 2026[30] - The company focuses on advanced digital transformation solutions, leveraging cloud-native deployment, DevOps, AI, and automation[49] - The company plans to further invest in AI capabilities to drive scale and efficiency across operations[73] Risk Factors - The company operates in a highly competitive industry, facing substantial competition from resellers, manufacturers, and service providers, which could harm financial performance[76] - Cybersecurity threats and data breaches could significantly impact business operations and reputation, with potential legal and regulatory consequences[89] - The reliance on cloud-based solutions may disrupt traditional business models and increase direct sales to customers, impacting hardware sales[78] - The ability to attract and retain key personnel is crucial for business success, with competitive labor markets increasing the risk of higher costs and turnover[92] - The company is exposed to accounts receivable risks, particularly during economic downturns, which could impact cash flows[100] - Inventory risks are heightened due to rapid technological changes and potential obsolescence, affecting business operations[101] - Legal and regulatory compliance risks could result in fines or contract terminations, adversely affecting business operations[118] Financial Position - As of December 31, 2025, the company had a total debt outstanding of $5.6 billion and $353 million in obligations under inventory financing agreements[128] - The company has $1.9 billion available to borrow under its senior unsecured revolving loan facility[128] - The company reported $635 million in variable rate debt outstanding, exposing it to interest rate risk[130] - Total unsecured indebtedness as of December 31, 2025, was $5.6 billion, with compliance to covenants under credit agreements[209] - The company entered into a new credit agreement in December 2025, increasing its borrowing capacity by $650 million[208] Shareholder Returns - The company declared a quarterly cash dividend of $0.630 per share, payable on March 10, 2026[149] - During the three months ended December 31, 2025, the company repurchased a total of 1.1 million shares of its common stock[151] - The average price paid per share for repurchases in October, November, and December 2025 was $155.34, $143.05, and $143.46 respectively[151] - The company has approximately $685 million remaining under its share repurchase program as of December 31, 2025[152]

Company Overview - CDW Corporation is valued at a market cap of $16.5 billion and is a leading North American IT solutions provider, assisting organizations in designing, procuring, implementing, and managing technology infrastructure [1] Stock Performance - CDW shares have underperformed the broader market over the past 52 weeks, declining 33.9%, while the S&P 500 Index has increased by 11.9% [2] - Year-to-date, CDW stock has dropped 8.1%, contrasting with a marginal decline in the S&P 500 [2] - Compared to the State Street Technology Select Sector SPDR Fund, which saw a 16.3% increase over the past 52 weeks, CDW's performance has lagged [3] Recent Financial Results - On February 4, CDW reported Q4 2025 results that exceeded expectations, with revenue rising 6% year-over-year to $5.5 billion and non-GAAP EPS of $2.57 surpassing consensus forecasts [5] - The gross profit margin expanded to 22.8%, driven by a shift towards higher-value offerings, despite slight pressure on operating margins from increased SG&A investments [5] Future Earnings Expectations - For the fiscal year ending December 2026, analysts project CDW's EPS to increase by 4.3% year-over-year to $9.94, with a history of beating consensus estimates in the last four quarters [6] - The consensus rating among 12 analysts covering the stock is a "Moderate Buy," consisting of six "Strong Buy" and six "Hold" ratings [6] Analyst Ratings - The current consensus is more bullish than three months ago, when there were five "Strong Buy" suggestions [7] - Citigroup analyst Asiya Merchant maintained a "Neutral" rating on CDW and slightly raised the price target to $150 from $148 [7]

Core Viewpoint - CDW Corporation has been downgraded to a hold rating due to a weaker spending environment and weak Q4 guidance, although Q4 2025 results exceeded expectations [1] Group 1: Company Performance - CDW Corporation's Q4 2025 results were better than anticipated, indicating potential resilience despite a challenging spending environment [1] Group 2: Analyst Perspective - The analyst expresses a long-term investment philosophy focused on identifying undervalued companies with growth potential, emphasizing the importance of buying quality companies at a discount [1]

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