Core Viewpoint - CDW is expected to report quarterly earnings of $1.96 per share, reflecting a 2.1% increase year-over-year, with revenues projected at $4.89 billion, a 0.4% increase compared to the previous year [1]. Earnings Estimates - Over the last 30 days, the consensus EPS estimate has been revised downward by 2.8%, indicating a collective reassessment by analysts [2]. - Changes in earnings estimates are crucial for predicting investor reactions, as empirical studies show a strong correlation between earnings estimate revisions and short-term stock performance [3]. Revenue Projections - Analysts estimate 'Public- Government' revenues to be $497.84 million, representing an 8.4% decrease year-over-year [4]. - 'Net sales- Public' are projected at $1.73 billion, indicating a 0.3% increase from the previous year [5]. - 'Public- Healthcare' is expected to reach $630.71 million, reflecting a 7.9% increase year-over-year [5]. - 'Net sales- Small Business' are estimated at $380.47 million, showing a slight decrease of 0.1% from the prior year [5]. - 'Public- Education' is projected at $601.26 million, a 0.8% increase from the previous year [6]. - 'Net sales- Corporate' are expected to be $2.16 billion, indicating a 0.9% increase year-over-year [6]. - 'Net sales- Other' are projected at $637.67 million, reflecting a 1% increase from the prior year [6]. Major Product and Services Estimates - 'Net sales- Major Product and Services- Other' are expected to be $25.82 million, indicating a 2.2% decrease year-over-year [7]. - 'Net sales- Major Product and Services- Hardware- Notebooks/Mobile Devices' are projected at $1.18 billion, reflecting a 3.5% increase [7]. - 'Net sales- Major Product and Services- Hardware- Netcomm Products' are estimated at $587.46 million, indicating a 3.1% increase [8]. - 'Net sales- Major Product and Services- Hardware- Desktops' are expected to reach $260.28 million, reflecting a 0.7% increase [8]. - Overall, 'Net sales- Major Product and Services- Hardware' are projected at $3.54 billion, indicating a slight decrease of 0.1% year-over-year [9]. Stock Performance - CDW shares have increased by 7.2% over the past month, contrasting with a 0.5% decline in the Zacks S&P 500 composite [9].

Core Viewpoint - The market anticipates CDW to report a year-over-year increase in earnings driven by higher revenues in its upcoming earnings report for the quarter ended March 2025, with a focus on how actual results compare to estimates [1][2]. Earnings Expectations - CDW is expected to post quarterly earnings of $1.96 per share, reflecting a year-over-year change of +2.1%, while revenues are projected to be $4.89 billion, up 0.4% from the previous year [3]. - The consensus EPS estimate has been revised 2.79% lower over the last 30 days, indicating a reassessment by analysts [4]. Earnings Surprise Prediction - The Zacks Earnings ESP model indicates that the Most Accurate Estimate for CDW is higher than the Zacks Consensus Estimate, resulting in an Earnings ESP of +1.02% [10][11]. - Despite the positive Earnings ESP, CDW currently holds a Zacks Rank of 4, complicating predictions of an earnings beat [11]. Historical Performance - In the last reported quarter, CDW was expected to earn $2.33 per share but exceeded expectations with earnings of $2.48, achieving a surprise of +6.44% [12]. - Over the past four quarters, CDW has only beaten consensus EPS estimates once [13]. Investment Considerations - An earnings beat or miss may not solely dictate stock movement, as other factors can influence investor sentiment [14]. - While betting on stocks expected to beat earnings increases the odds of success, CDW does not currently appear to be a compelling earnings-beat candidate [15][16].

Group 1: Company Performance - CDW shares increased by 9.2% to $159.48, following a 12.1% loss over the past four weeks, indicating a rebound in business momentum across all sales units and global markets [1] - The cloud and SaaS business saw strong growth, with software sales up 5%, driven by double-digit growth in SaaS and IaaS, and a significant impact on profits with gross profit rising in the mid-teens [2] - CDW Managed Services grew by over 20%, and the company aims to outpace the U.S. IT market by 2–3% in 2025, supported by a customer base of over 250,000 [2] Group 2: Financial Expectations - CDW is expected to report quarterly earnings of $1.96 per share, reflecting a year-over-year change of +2.1%, with revenues projected at $4.9 billion, up 0.7% from the previous year [3] - The consensus EPS estimate for CDW has remained unchanged over the last 30 days, suggesting that stock price movements may be influenced by trends in earnings estimate revisions [5] Group 3: Market Position and Comparisons - CDW's share buyback programs and robust cash flow are seen as positive factors for the company's prospects [3] - In comparison, Taboola.com Ltd. (TBLA) closed the last trading session 9.1% higher, but has returned -12.1% in the past month, indicating differing performance within the same industry [5]

Core Insights - CDW Engineering has partnered with Ecovert to launch Climate Enhanced Building Condition Assessments (CE-BCA), integrating decarbonization planning and climate resilience into traditional assessments [1][2] - The CE-BCA addresses the increasing pressure on the real estate industry regarding sustainability, regulatory compliance, and ESG considerations [2] - This service provides property owners and investors with critical insights into emissions profiles and carbon reduction opportunities, aligning with Canada's net-zero goals [3][6] Comprehensive Report Features - The CE-BCA delivers a single, comprehensive report that evaluates a property's climate risks, resiliency, and carbon footprint [6] - It includes recommendations for energy-efficient replacements and a single-source cost estimate to avoid contradictory information [7] - The assessment identifies incentive programs to offset capital costs related to sustainable upgrades, enhancing long-term property value [6][7] Company Background - CDW Engineering is a leading provider of commercial property inspection and engineering consulting services in Canada, with decades of experience [4] - Ecovert specializes in sustainable building solutions, focusing on reducing carbon footprints and improving energy efficiency through innovative strategies [5]

Core Viewpoint - CDW's recent earnings report shows a mixed performance with a slight decline in year-over-year earnings, while revenues have grown modestly, indicating a challenging demand environment across various segments [2][3][4]. Financial Performance - CDW reported Q4 2024 non-GAAP EPS of $2.48, exceeding the Zacks Consensus Estimate of $2.33, but reflecting a 3.5% year-over-year decline [2]. - Revenues for Q4 2024 increased by 3.3% year-over-year to $5.186 billion, surpassing the consensus estimate of $4.97 billion, driven by strong performance in Corporate, Small Business, Public, and International segments [3]. - For the full year 2024, net sales decreased by 1.8% year-over-year to $21 million due to cautious technology spending, although the healthcare vertical grew by 7.1% [4]. Segment Analysis - Corporate segment net sales were $2.345 billion, up 2.6% year-over-year [5]. - Small Business segment net sales rose 2.7% year-over-year to $380 million [5]. - Public segment revenues totaled $1.854 billion, a 4.4% increase, with healthcare customer sales surging by 27.5%, while government and education sectors saw declines [5][6]. Margin and Expenses - Gross profit was $1.155 billion, a slight increase of 0.1% year-over-year, but gross profit margin decreased from 23% to 22.3% due to a higher mix of notebook and desktop sales [7]. - Non-GAAP operating income fell 3.8% year-over-year to $499 million, with the operating margin declining to 9.6% from 10.3% [7]. - Selling and administrative expenses increased by 3.9% year-over-year to $747 million, driven by various cost factors [8]. Balance Sheet and Cash Flow - As of December 31, 2024, CDW had cash and cash equivalents of $503.5 million, down from $946.7 million as of September 30, 2024 [9]. - Long-term debt remained stable at $5.607 billion [9]. - Cash flow from operating activities for the year was $1.277 billion, compared to $1.6 million in the previous year [9]. Market Outlook - Estimates for CDW have trended downward over the past month, indicating a cautious outlook [10][12]. - The stock currently holds a Zacks Rank 3 (Hold), suggesting an expectation of in-line returns in the near term [12]. Industry Comparison - CDW operates within the Zacks Computers - IT Services industry, where competitor Amdocs reported a revenue decline of 10.9% year-over-year, contrasting with CDW's modest growth [13]. - Amdocs is expected to post earnings of $1.71 per share for the current quarter, reflecting a 9.6% increase from the previous year [14].

Financial Performance - In 2024, CDW generated net sales of $20.99 billion, a decrease from $21.38 billion in 2023, and $23.75 billion in 2022[42]. - Net sales for the year ended December 31, 2024, decreased by $377 million, or 1.8%, to $20,998.7 million compared to $21,376.0 million in 2023[169]. - Gross profit for 2024 was $4,602.4 million, a decrease of $50 million, or 1.1%, with a gross profit margin of 21.9%, up from 21.8% in 2023[165]. - Operating income decreased by $30 million, or 1.8%, to $1,651.3 million for 2024, maintaining an operating income margin of 7.9%[167]. - Net income for 2024 was $1,077.8 million, down 2.4% from $1,104.3 million in 2023[163]. - Non-GAAP net income for 2024 was $1,287.2 million, compared to $1,346.2 million in 2023[160]. - Average daily sales decreased to $82.7 million in 2024 from $84.2 million in 2023[160]. - Free cash flow for 2024 was $1,154.7 million, down from $1,450.5 million in 2023, representing a decrease of approximately 20.3%[189]. - Adjusted free cash flow for 2024 was $1,079.0 million, compared to $1,426.8 million in 2023, reflecting a decline of about 24.4%[189]. - Net cash provided by operating activities was $1,277.3 million in 2024, down from $1,598.7 million in 2023[160]. - The effective income tax rate for 2024 was 24.9%, compared to 23.9% in 2023, primarily due to lower excess tax benefits on equity-based compensation[168]. Sales and Market Segments - The US business accounted for approximately 90% of net sales, with five dedicated customer channels each generating over $1.5 billion in net sales in 2024[27]. - Net sales from the UK and Canada combined reached $2.5 billion in 2024[27]. - Corporate segment net sales decreased by $124 million, or 1.4%, primarily due to a decrease in netcomm products[172]. - Public segment net sales decreased by $148 million, or 1.8%, mainly due to declines in various hardware categories[175]. Operational Insights - CDW serves over 250,000 customers across business, government, education, and healthcare sectors in the US, UK, and Canada[24]. - The company operates two distribution centers in North America and one in the UK, handling approximately 26 million units annually[32]. - Drop-shipment arrangements accounted for approximately 54% of total North America net sales in 2024[33]. - The company has partnerships with over 1,000 vendor partners, generating $2.0 billion in net sales from each of its three largest partners in 2024[29]. - The company is positioned to benefit from growing demand for IT solutions driven by new technologies, including hybrid and cloud computing and artificial intelligence[22]. Employee and Workplace - The company has approximately 15,100 coworkers globally, with 11,500 in the US and 3,600 in international locations[46]. - Over 50% of US net sales are generated by account managers with more than seven years of tenure[46]. - The company is committed to prioritizing the health and well-being of coworkers, dedicating resources to identify safety hazards and provide mental health resources[51]. - The company’s total rewards philosophy includes competitive compensation and benefits designed to attract and retain talent[50]. Risks and Challenges - Cybersecurity threats pose significant risks to the company's operations, with potential impacts on reputation and compliance with legal obligations[74]. - The company faces risks related to accounts receivable, particularly during economic downturns, which could adversely affect cash flows[89]. - Inventory risks are heightened due to rapid technological changes and potential obsolescence, necessitating effective inventory management strategies[90]. - The company is exposed to increased labor costs and turnover rates, which could disrupt operations and financial performance[84]. - The company maintains insurance for data security, but coverage may be insufficient to address all potential losses from security breaches[79]. - The company is subject to legal and regulatory risks, including compliance with public sector contracts, which could result in fines or termination of contracts[106]. Financial Position and Debt - The company had a total debt of $5.8 billion as of December 31, 2024, with an additional $355 million in obligations under inventory financing agreements[115]. - Total long-term debt increased to $5,606.8 million in 2024 from $5,031.4 million in 2023, marking an increase of about 11.4%[216]. - The company had $635 million of variable rate debt outstanding as of December 31, 2024, exposing it to interest rate risk[121]. - As of December 31, 2024, the company had $1.2 billion available for additional borrowing under its Revolving Loan Facility[120]. Shareholder Returns - On February 5, 2025, the Board of Directors declared a quarterly cash dividend of $0.625 per share, payable on March 11, 2025[140]. - The company repurchased a total of 0.8 million shares during the three months ended December 31, 2024, with an average price paid per share ranging from $177.39 to $216.91[142]. - The company authorized a $750 million increase to its share repurchase program, which was incremental to approximately $588 million remaining as of December 31, 2024[143]. - The company repurchased 2.4 million shares for $500 million under its share repurchase program in 2024[198]. Strategic Initiatives - The company is implementing a new enterprise resource planning (ERP) system, expected to be released in 2025, with incremental releases continuing in 2026[55]. - The company’s marketing strategy targets current and prospective customers through integrated programs across various channels, including digital and social media[53]. - The company’s ability to compete effectively depends on continued innovations in technology and the adoption of those innovations by customers[64].

Group 1 - The analyst initially gave a hold rating to CDW Corp. due to uncertainty regarding the timing of growth recovery [1] - After reviewing CDW's 4Q24 results, the analyst's views have changed, indicating a potential shift in outlook for the company [1] - The investment approach focuses on identifying undervalued companies with long-term growth potential, emphasizing the importance of buying quality companies at a discount [1]

Financial Data and Key Metrics Changes - For Q4 2024, net sales reached $5.2 billion, a 5% increase compared to 2023 on an average daily sales basis [10] - Gross profit was $1.16 billion, flat as reported but up 2% on an average daily sales basis [10] - Non-GAAP operating income was nearly $500 million, down 4% year-over-year, and non-GAAP net income per share was $2.48, down 4% [11][12] - Full year consolidated gross profit was approximately 1% below 2023, with a 3% decline in top line [13] Business Line Data and Key Metrics Changes - Corporate and Small Business segments both saw a 4% increase in top line [18] - Healthcare segment experienced a standout performance with a 30% increase [18] - Education declined by 2%, while government spending faced uncertainty leading to a decline [19] - Hardware sales increased by 4%, with client devices and storage showing mid-single-digit growth [20] Market Data and Key Metrics Changes - International sales grew by 5%, but were below historical growth rates due to lack of budget flush activity [44] - Commercial markets showed signs of stability, returning to growth despite cautious customer behavior [17] - Public sector performance varied, with Healthcare driving growth while Education and government faced challenges [19] Company Strategy and Development Direction - The company maintains a focus on delivering as-a-service solutions and enhancing customer service capabilities [11][12] - Strategic investments in cloud and SaaS offerings are expected to drive future growth [28] - The acquisition of Mission Cloud Services is aimed at expanding AWS capabilities and enhancing service offerings [29][30] Management's Comments on Operating Environment and Future Outlook - Management anticipates low single-digit growth in the U.S. IT market for 2025, with expectations to outpace market growth by 200 to 300 basis points [35] - Customer sentiment remains cautious, with ongoing project scrutiny and a focus on short-term ROI [36] - The company is positioned to leverage competitive advantages to outperform the market despite macroeconomic uncertainties [37] Other Important Information - The company returned $832 million to shareholders through dividends and share repurchases, with an increase in share repurchase authorization by $750 million [14][56] - Adjusted free cash flow for 2024 was $1.1 billion, achieving 84% of non-GAAP net income [55] Q&A Session Summary Question: How does the company view different parts of the public vertical for growth? - Management acknowledges the fluidity and lack of clarity in the public sector, particularly in Education and government, and is cautiously optimistic about technology's long-term role [70][72] Question: What is driving the muted gross profit dollar growth? - Management indicates that the variance in growth rates is not significant, with a slight shift in mix impacting gross profit [78] Question: What drove the strong performance in Healthcare? - The strong performance is attributed to a balanced success in cloud offerings and strategic investments in Healthcare capabilities [82][84] Question: How does the company view the impact of Microsoft changes on results? - Management sees the impact from Microsoft changes as not material and is pivoting to other growth opportunities [91] Question: What is the expectation for margins in fiscal '25? - Management expects core business margins to hold firm, with modest growth in solutions aiding margins [108] Question: What is the significance of the Mission Cloud Services acquisition? - The acquisition is seen as a strategic investment that will enhance growth rates and capabilities, although immediate financial impact will be limited [114][116]

Core Insights - CDW Corporation reported fourth-quarter 2024 non-GAAP EPS of $2.48, exceeding the Zacks Consensus Estimate of $2.33, but reflecting a 3.5% year-over-year decline [1] - The company's revenues increased by 3.3% year over year to $5.186 billion, surpassing the consensus estimate of $4.97 billion, driven by strong performance in Corporate, Small Business, Public, and International segments [2] Financial Performance - For 2024, net sales decreased by 1.8% year over year to $21 million due to cautious technology spending, although the healthcare vertical grew by 7.1% [3] - CDW announced a quarterly dividend of 62.5 cents, payable on March 11, 2025, and authorized a $750 million increase to its share repurchase program [3] Stock Market Reaction - Following the results, CDW's shares rose by 11.5% in pre-market trading on February 5, despite a 13.6% decline over the past year compared to the Zacks Computers-IT Services industry's growth of 9.6% [4] Segment Performance - Corporate segment net sales were $2.345 billion, up 2.6% year over year; Small Business segment net sales were $380 million, up 2.7%; Public segment revenues totaled $1.854 billion, reflecting 4.4% growth, driven by a 27.5% increase in healthcare customer sales [5] - Other operations in Canada and the U.K. saw net sales rise by 3.4% to $607 million [6] Margin Analysis - Gross profit was $1.155 billion, a slight increase of 0.1% year over year, with gross profit margin decreasing from 23% to 22.3% due to a higher mix of notebook and desktop sales [7] - Non-GAAP operating income fell by 3.8% year over year to $499 million, with the non-GAAP operating margin decreasing from 10.3% to 9.6% [7] Expense Overview - Selling and administrative expenses rose by 3.9% year over year to $747 million, primarily due to lower performance-based compensation, higher workplace optimization costs, and credit loss provisions [9] Balance Sheet and Cash Flow - As of December 31, 2024, CDW had $503.5 million in cash and cash equivalents, down from $946.7 million as of September 30, 2024; long-term debt remained stable at $5.607 billion [10] - The company generated $1.277 billion in cash flow from operating activities for the year, compared to $1.6 million in the previous year [10]

Core Insights - Investors in the Computers - IT Services sector should consider CDW and CyberArk for potential undervalued stock opportunities [1] - A strong Zacks Rank combined with favorable Value category grades is an effective method for identifying value opportunities [2] Company Comparison - CDW has a Zacks Rank of 2 (Buy), indicating stronger earnings estimate revision activity compared to CyberArk, which has a Zacks Rank of 3 (Hold) [3] - CDW's forward P/E ratio is 20.21, significantly lower than CyberArk's forward P/E of 105.03, suggesting CDW may be undervalued [5] - CDW has a PEG ratio of 5.10, while CyberArk's PEG ratio is 5.25, indicating that both companies have similar growth expectations relative to their valuations [5] - CDW's P/B ratio is 11.31, compared to CyberArk's P/B of 13.32, further supporting CDW's more attractive valuation metrics [6] - Overall, CDW has stronger estimate revision activity and more favorable valuation metrics, making it the superior option for value investors [7]