Why Is CDW (CDW) Down 16.3% Since Last Earnings Report?

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].