Core Viewpoint - CDW has been upgraded to a Zacks Rank 2 (Buy) due to an upward trend in earnings estimates, indicating a positive earnings outlook that may lead to increased stock price [1][3]. Earnings Estimates and Stock Price Movement - The Zacks rating system is based on changes in a company's earnings picture, which is a significant factor influencing stock prices [2][4]. - Rising earnings estimates are strongly correlated with near-term stock price movements, particularly due to the actions of institutional investors who adjust their valuations based on these estimates [4][5]. CDW's Earnings Outlook - CDW is expected to earn $9.73 per share for the fiscal year ending December 2025, with no year-over-year change, but analysts have raised their estimates by 1.4% over the past three months [8]. - The upgrade to Zacks Rank 2 reflects an improvement in CDW's underlying business, which is likely to attract investor interest and push the stock higher [5][10]. Zacks Rank System - The Zacks Rank system classifies stocks into five groups based on earnings estimates, with a strong historical performance, particularly for Zacks Rank 1 stocks, which have generated an average annual return of +25% since 1988 [7]. - Only the top 20% of Zacks-covered stocks receive a "Strong Buy" or "Buy" rating, indicating superior earnings estimate revisions and potential for market-beating returns [9][10].

Core Viewpoint - Wall Street anticipates a year-over-year decline in earnings for CDW despite an increase in revenues, with the actual results being crucial for stock price movement [1][2]. Earnings Expectations - CDW is expected to report quarterly earnings of $2.49 per share, reflecting a -0.4% change year-over-year, while revenues are projected to be $5.51 billion, up 1.6% from the previous year [3]. Estimate Revisions - The consensus EPS estimate has remained unchanged over the last 30 days, indicating stability in analysts' assessments [4]. Earnings Surprise Prediction - The Zacks Earnings ESP for CDW is +2.41%, suggesting a positive outlook as the Most Accurate Estimate exceeds the Zacks Consensus Estimate [12]. Historical Performance - In the last reported quarter, CDW exceeded expectations with earnings of $2.15 per share against an estimate of $1.96, resulting in a surprise of +9.69% [13]. Overall Assessment - CDW is viewed as a strong candidate for an earnings beat, but investors should consider additional factors beyond earnings results when making investment decisions [15][17].

Core Viewpoint - CDW is positioned well to potentially beat earnings estimates in its upcoming quarterly report, supported by a strong history of exceeding expectations [1][2]. Earnings Performance - CDW has a solid track record of surpassing earnings estimates, with an average surprise of 8.07% over the last two quarters [2]. - In the last reported quarter, CDW achieved earnings of $2.15 per share, exceeding the Zacks Consensus Estimate of $1.96 per share by 9.69% [3]. - In the previous quarter, CDW's actual earnings were $2.48 per share, surpassing the expected $2.33 per share, resulting in a surprise of 6.44% [3]. Earnings Estimates and Predictions - Recent estimates for CDW have been trending upward, indicating positive sentiment among analysts [5]. - The Zacks Earnings ESP for CDW is currently +2.41%, suggesting increased bullishness regarding its near-term earnings potential [8]. - The combination of a positive Earnings ESP and a Zacks Rank of 3 (Hold) indicates a strong likelihood of another earnings beat [8]. Statistical Insights - Research indicates that stocks with a positive Earnings ESP and a Zacks Rank of 3 or better have a nearly 70% chance of producing a positive surprise [6]. - The Zacks Earnings ESP compares the Most Accurate Estimate to the Zacks Consensus Estimate, reflecting the latest analyst revisions [7].

Core Viewpoint - CDW Corporation is a leading provider of integrated information technology solutions, primarily generating revenue from the United States market [1]. Group 1: Company Overview - CDW Corporation operates through four reportable segments: Corporate, Public, Small Business, and Other (which includes CDW UK) [1]. Group 2: Educational Background of Analysts - The analyst has a master's degree in Analytics from Northwestern University and a bachelor's degree in Accounting, with over 10 years of experience in the investment arena [1]. Group 3: Investment Focus - The analyst expresses a personal interest in dividend investing and aims to share insights with the Seeking Alpha community [1].

Core Insights - CDW Corporation has partnered with Asato Corporation to provide AI-powered IT asset intelligence, addressing the complexities of modern IT infrastructures for a wide range of customers, from large enterprises to SMBs [1][9] - The collaboration aims to simplify IT operations, reduce costs, and enhance decision-making through Asato's AI-native business observability platform [2][3] Group 1: Partnership and Platform Benefits - The integration of Asato's platform into CDW's solutions enhances both companies' capabilities, allowing organizations to streamline IT operations and make smarter technology investments [3] - Asato's platform has shown measurable results in pilot deployments, including improved IT asset visibility, reduced technology waste, and enhanced financial planning [4][9] - The partnership provides a direct way for organizations to reduce IT bottlenecks and maximize asset utilization through AI-driven decision-making [5] Group 2: Customer Focus and Market Trends - CDW emphasizes tailored solutions for clients with diverse technology needs, ensuring effective and cost-conscious solutions amid macroeconomic uncertainties [6][8] - A notable project involved migrating a commercial truck manufacturer's HR systems to a cloud-hosted environment, generating over $1 million in professional services fees [7] - Despite cautious spending due to global uncertainties, customers remain focused on mission-critical projects, with CDW assisting in optimizing expenditures and planning [7][8]

Core Insights - Zacks Premium provides tools for investors to enhance their stock market engagement and confidence, including daily updates, research reports, and stock screens [1] Zacks Style Scores - Zacks Style Scores are indicators that assist investors in selecting stocks likely to outperform the market within 30 days, rated from A to F based on value, growth, and momentum characteristics [2] Value Score - The Value Style Score focuses on identifying undervalued stocks using ratios such as P/E, PEG, Price/Sales, and Price/Cash Flow to highlight attractive investment opportunities [3] Growth Score - The Growth Style Score emphasizes a company's financial health and future outlook, analyzing projected and historical earnings, sales, and cash flow to find stocks with sustainable growth potential [4] Momentum Score - The Momentum Style Score helps investors capitalize on price trends by evaluating one-week price changes and monthly earnings estimate changes, indicating favorable buying opportunities for high-momentum stocks [5] VGM Score - The VGM Score combines all three Style Scores, serving as a comprehensive indicator to identify stocks with strong value, growth forecasts, and promising momentum [6] Zacks Rank - The Zacks Rank is a proprietary model that leverages earnings estimate revisions to guide investors in building successful portfolios, with 1 (Strong Buy) stocks achieving an average annual return of +25.41% since 1988, significantly outperforming the S&P 500 [7][8] Stock to Watch: CDW Corporation - CDW Corporation, a leading IT solutions provider, holds a 3 (Hold) Zacks Rank and a VGM Score of B, indicating a solid position in the market [12] - The company has a Value Style Score of B, supported by a forward P/E ratio of 18.4, making it attractive to value investors [13] - Recent upward revisions in earnings estimates for fiscal 2025 have increased the Zacks Consensus Estimate by $0.14 to $9.71 per share, with an average earnings surprise of 2.1%, positioning CDW as a noteworthy investment option [13]

Summary of CDW FY Conference Call - May 13, 2025 Company Overview - **Company**: CDW (CDW) - **Industry**: Technology Solutions and Services Key Points and Arguments Macroeconomic Concerns - There is significant macroeconomic volatility and uncertainty, but technology remains essential for competitive advantage and employee attraction [2][3] - Customers are cautious due to policy uncertainty, yet there is pent-up demand for technology across various sectors [3][4] Demand and Growth Outlook - CDW anticipates muted growth in specific sectors like federal and education, but overall technology spending remains strong [4][11] - The commercial space has shown a steady return to growth over the last two quarters, although enterprise solutions have experienced some variability [9][10] Tariff Impact - CDW has leveraged tariff uncertainties to assist customers by providing pre-tariff pricing on client devices, particularly in the K-12 sector [6][7] - The company maintains strong relationships with customers, which helps navigate complexities arising from tariff changes [7][8] International Business Performance - CDW's international business has performed well despite geopolitical uncertainties, with a cautious outlook for the fiscal year [18] AI and Technology Investments - CDW is positioned as a full-stack organization, focusing on AI investments to enhance efficiency, personalization, and customer experience [19][20] - The company has established healthcare innovation labs to facilitate customer engagement and technology exploration [22][23] Client Device Market - Growth in client devices has been broad-based, with education seeing more pre-buying activity compared to enterprise [28][29] Cloud Strategy - CDW is focused on scaling its cloud business, emphasizing professional and managed services to drive customer engagement [32][33] - The company views cloud and security as high-growth areas for future acquisitions [35][36] Financial Performance - Gross margins have expanded significantly over the past six years but are plateauing due to shifts in product mix [50][51] - Operating expenses have been consistently expanded to support growth initiatives, with a focus on balancing customer service and cost leverage [53][54] Government and Education Sector Exposure - The federal government sector has shown a modest decline, while state and local government business has grown modestly [59][60] - The K-12 education sector may experience muted spending due to economic pressures [61] Pricing and Demand Elasticity - Price increases due to tariffs have been largely accepted by customers, with spending continuing despite economic uncertainties [62] - CDW operates as a cost-plus provider, successfully passing on price increases while maintaining gross profit neutrality [63] Additional Important Insights - CDW's strategy emphasizes a full lifecycle approach, integrating consultancy and managed services with product sourcing to enhance customer experience [38][40] - The company is actively refining its go-to-market strategy to capture opportunities across various customer segments [46] - CDW's ability to adapt its pricing and bundling strategies based on customer behavior is a key focus for future growth [107][108]

PART I FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements%3A) The financial statements detail CDW's financial position and performance for Q1 2025, showing asset growth, increased net sales, and reduced operating cash flow [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to **$15.02 billion** as of March 31, 2025, with liabilities rising and stockholders' equity slightly decreasing Consolidated Balance Sheet Highlights (in millions) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Current Assets** | $7,651.6 | $7,373.1 | | Goodwill | $4,636.1 | $4,620.4 | | **Total Assets** | **$15,018.5** | **$14,678.4** | | **Total Current Liabilities** | $5,781.5 | $5,474.4 | | Long-term Debt | $5,622.4 | $5,607.0 | | **Total Liabilities** | **$12,695.4** | **$12,325.7** | | **Total Stockholders' Equity** | **$2,323.1** | **$2,352.7** | [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) For Q1 2025, Net Sales grew 6.7% to **$5.20 billion**, operating income increased, and Net Income rose to **$224.9 million** Q1 2025 vs. Q1 2024 Performance (in millions, except per-share data) | Metric | Q1 2025 | Q1 2024 | % Change | | :--- | :--- | :--- | :--- | | Net sales | $5,199.1 | $4,872.7 | 6.7% | | Gross profit | $1,122.3 | $1,063.3 | 5.5% | | Operating income | $361.4 | $328.0 | 10.2% | | Net income | $224.9 | $216.1 | 4.1% | | Diluted EPS | $1.69 | $1.59 | 6.3% | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operating activities decreased to **$287.2 million** in Q1 2025, mainly due to working capital changes, with increased cash used in financing activities Cash Flow Summary (in millions) | Cash Flow Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $287.2 | $440.0 | | Net cash used in investing activities | $(31.9) | $(29.7) | | Net cash used in financing activities | $(294.1) | $(192.6) | | Net (decrease) increase in cash | $(32.1) | $215.1 | - The decrease in operating cash flow was primarily driven by changes in working capital, including a **$184.5 million** use of cash for accounts receivable and a **$112.1 million** use for merchandise inventory[16](index=16&type=chunk) [Notes to Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes detail accounting policies, acquisitions, debt, segment performance, and contingencies, including a DOJ investigation related to the E-Rate Program - The company completed its acquisition of Mission Cloud Services, Inc. on November 27, 2024, for a base purchase price of **$330 million**, with the purchase price allocation being preliminary[30](index=30&type=chunk) - Total long-term debt, including current maturities, stood at approximately **$5.85 billion** as of March 31, 2025, with the company in compliance with all debt covenants[40](index=40&type=chunk) Net Sales by Segment - Q1 2025 vs Q1 2024 (in millions) | Segment | Q1 2025 Net Sales | Q1 2024 Net Sales | % Change | | :--- | :--- | :--- | :--- | | Corporate | $2,236.0 | $2,135.9 | 4.7% | | Small Business | $404.6 | $380.9 | 6.2% | | Public | $1,878.1 | $1,724.7 | 8.9% | | Other | $680.4 | $631.2 | 7.8% | | **Total** | **$5,199.1** | **$4,872.7** | **6.7%** | - The company received a Civil Investigative Demand from the Department of Justice (DOJ) on June 11, 2024, related to a False Claims Act investigation concerning the E-Rate Program, and is cooperating without currently assessing the outcome or potential loss[61](index=61&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes Q1 2025 revenue growth to improved customer spending, with a slight gross profit margin decrease and strong liquidity [Results of Operations](index=22&type=section&id=Results%20of%20Operations) In Q1 2025, Net Sales rose by **$326 million** (6.7%) YoY, driven by demand for various products, with operating income increasing despite a higher effective tax rate - Net sales increase was primarily due to customer demand for notebooks/mobile devices, desktops, software and services, partially offset by decreases in other hardware categories[93](index=93&type=chunk) - Gross profit margin decreased by **20 basis points**, attributed to an increased mix of lower-margin products, particularly notebooks/mobile devices[94](index=94&type=chunk) - The effective income tax rate increased from **21.9%** to **26.0%** YoY, mainly because of lower excess tax benefits on equity-based compensation in 2025[98](index=98&type=chunk) [Segment Results of Operations](index=23&type=section&id=Segment%20Results%20of%20Operations) All segments reported year-over-year net sales growth in Q1 2025, with the Public segment leading and Corporate and Other segments showing significant operating income increases Operating Income by Segment - Q1 2025 vs Q1 2024 (in millions) | Segment | Q1 2025 Operating Income | Q1 2024 Operating Income | % Change | | :--- | :--- | :--- | :--- | | Corporate | $220.7 | $178.0 | 24.0% | | Small Business | $43.4 | $46.5 | (6.7)% | | Public | $141.2 | $126.0 | 12.1% | | Other | $39.1 | $25.3 | 54.5% | - Public segment growth was driven by notebooks/mobile devices in education and healthcare, and desktops and software in healthcare[107](index=107&type=chunk) - Corporate segment operating income grew significantly due to higher gross profit and lower coworker-related costs, despite higher performance-based compensation[105](index=105&type=chunk) [Non-GAAP Financial Measure Reconciliations](index=25&type=section&id=Non-GAAP%20Financial%20Measure%20Reconciliations) The company provides non-GAAP metrics for Q1 2025, showing Non-GAAP Operating Income of **$444.0 million** and Non-GAAP EPS of **$2.15** after various adjustments Non-GAAP Reconciliation Highlights (in millions, except per share) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Operating Income (GAAP) | $361.4 | $328.0 | | **Non-GAAP Operating Income** | **$444.0** | **$403.5** | | Net Income (GAAP) | $224.9 | $216.1 | | **Non-GAAP Net Income** | **$286.5** | **$260.8** | | Diluted EPS (GAAP) | $1.69 | $1.59 | | **Non-GAAP Diluted EPS** | **$2.15** | **$1.92** | [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) CDW maintains strong liquidity with **$1.3 billion** available under its Revolving Loan Facility, despite decreased operating cash flow and significant share repurchases - As of March 31, 2025, the company had **$1.3 billion** of availability for borrowings under its Revolving Loan Facility[124](index=124&type=chunk) - During Q1 2025, the company repurchased **1.1 million** shares for **$200 million**[128](index=128&type=chunk) - The cash conversion cycle decreased to **15 days** at March 31, 2025, from **16 days** at March 31, 2024, driven by a lower Days of Supply in Inventory (DIO)[135](index=135&type=chunk)[140](index=140&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk disclosures were reported from the Annual Report on Form 10-K for the year ended December 31, 2024 - As of March 31, 2025, there have been no material changes in the company's quantitative and qualitative disclosures about market risk[152](index=152&type=chunk) [Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal control over financial reporting - The company's management concluded that disclosure controls and procedures were effective as of the end of the period covered by the report[153](index=153&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, internal controls[154](index=154&type=chunk) PART II OTHER INFORMATION [Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings, including a DOJ False Claims Act investigation related to the E-Rate Program, with the outcome currently unassessable - The company received a Civil Investigative Demand from the DOJ in connection with a False Claims Act investigation regarding the Schools and Libraries Program (E-Rate Program)[61](index=61&type=chunk)[155](index=155&type=chunk) - At this stage, the company is unable to assess the probability of any outcome or the range of possible loss related to the DOJ investigation[61](index=61&type=chunk) [Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) The report refers to the Annual Report on Form 10-K for a discussion of risk factors, with no new risks detailed in this 10-Q - For a discussion of risk factors, the report refers to the company's Annual Report on Form 10-K for the year ended December 31, 2024[156](index=156&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q1 2025, CDW repurchased **1.1 million** shares for **$200 million**, and the Board authorized a **$750 million** increase to the share repurchase program Issuer Purchases of Equity Securities (Q1 2025) | Period | Total Shares Purchased (millions) | Average Price Paid per Share | | :--- | :--- | :--- | | January 2025 | 0.1 | $187.76 | | February 2025 | 0.2 | $189.52 | | March 2025 | 0.8 | $168.90 | | **Total** | **1.1** | | - On February 5, 2025, the Board of Directors authorized a **$750 million** increase to the company's share repurchase program[159](index=159&type=chunk) [Defaults Upon Senior Securities](index=32&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) None reported - No defaults upon senior securities were reported for the period[160](index=160&type=chunk) [Mine Safety Disclosures](index=32&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable - This item is not applicable to the company[161](index=161&type=chunk) [Other Information](index=32&type=section&id=Item%205.%20Other%20Information) None reported - No other information was reported under this item for the period[162](index=162&type=chunk) [Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including award agreements and CEO/CFO certifications - Exhibits filed include various forms of Performance Share Unit and Restricted Stock Unit award agreements, as well as CEO and CFO certifications (Rule 15d-14(a) and 18 U.S.C. 1350)[163](index=163&type=chunk)

Core Insights - CDW reported revenue of $5.2 billion for the quarter ended March 2025, reflecting a year-over-year increase of 6.7% and exceeding the Zacks Consensus Estimate by 6.25% [1] - Earnings per share (EPS) for the quarter was $2.15, up from $1.92 in the same quarter last year, representing a surprise of 9.69% over the consensus estimate of $1.96 [1] Financial Performance Metrics - Public-Government segment generated $537.80 million, surpassing the average estimate of $497.84 million, with a year-over-year change of -1% [4] - Public-Education segment reported $652.40 million, exceeding the average estimate of $601.26 million, with a year-over-year increase of 9.3% [4] - Public-Healthcare segment achieved $687.90 million, compared to the average estimate of $630.71 million, marking a year-over-year growth of 17.7% [4] - Total net sales for the Public segment were $1.88 billion, above the average estimate of $1.73 billion, reflecting an 8.9% year-over-year increase [4] - Other net sales reached $680.40 million, exceeding the average estimate of $637.67 million, with a year-over-year change of 7.8% [4] - Corporate net sales amounted to $2.24 billion, surpassing the average estimate of $2.16 billion, indicating a year-over-year increase of 4.7% [4] - Small Business segment reported $404.60 million, exceeding the average estimate of $380.47 million, with a year-over-year growth of 6.2% [4] Stock Performance - CDW shares have returned +12.3% over the past month, outperforming the Zacks S&P 500 composite's +10.6% change [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Core Viewpoint - CDW Corporation reported strong first-quarter 2025 results, with non-GAAP EPS of $2.15, exceeding estimates and showing a 12% year-over-year increase [1][2] Financial Performance - Revenues grew 6.7% year over year to $5.199 billion, driven by strong demand for notebooks, mobile devices, desktops, software, and services, despite declines in some hardware categories [2] - Quarterly revenues surpassed the consensus estimate of $4.89 billion [2] - Gross profit increased 5.5% year over year to $1.122 billion, while gross profit margin slightly decreased from 21.8% to 21.6% due to a higher mix of lower-margin products [6] - Non-GAAP operating income rose 10% year over year to $444 million, with the non-GAAP operating margin increasing to 8.5% from 8.3% [6] Segment Performance - Corporate segment net sales were $2.236 billion, up 6.3% year over year [4] - Small Business segment net sales increased 7.9% year over year to $405 million [4] - Public segment revenues reached $1.878 billion, representing a 10.6% growth, driven by significant increases in Healthcare (19.5%) and Education (11.1%) customer sales [5] - Other operations (Canadian and U.K.) saw net sales rise 9.5% to $680 million [5] Expenses and Cash Flow - Selling and administrative expenses rose 3.5% year over year to $761 million, influenced by lower performance-based compensation and transformation-related costs [8] - Cash flow from operating activities for the quarter was $287.2 million, down from $440 million in the previous year [9] Dividend Announcement - The company announced a quarterly dividend of 62.5 cents, payable on June 10, 2025, to shareholders on record as of May 26 [3] Stock Performance - Following the results, CDW's shares increased by 2% in pre-market trading on May 7, although shares have declined 25.6% over the past year compared to the industry growth of 4.2% [4]