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CDW Corporation (CDW) Q3 Earnings Top, Revenues Miss Estimates
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CDW Corporation (CDW - Free Report) delivered impressive third-quarter 2021 results. The company’s third-quarter non-GAAP earnings improved 16.4% year over year to $2.13 per share and surpassed the Zacks Consensus Estimate by 3.9%.
This year-over-year increase in the bottom-line result was primarily driven by higher revenues, lower interest expenses and share repurchases. The aforementioned factors were partially offset by an increase in the effective tax rate to 23.9% from 22.7% in the year-ago quarter.
The company’s revenues increased 11.4% year over year to $5.30 billion. However, quarterly revenues missed the consensus mark of $5.34 billion.
On a constant currency basis, sales improved 10.7%. Currency impact on top-line growth was primarily driven by the favorable currency exchange rates of the Canadian dollar and the British pound to the U.S. dollar.
This was the second consecutive time that the company has recorded more than $5 billion of quarterly revenues.
A rebound in commercial customer spending resulted in excellent performance, especially in Corporate, Small Business and CDW Canada. The improvements in Education and Healthcare channels were key positives in the quarter.
Net sales of CDW’s Corporate segment amounted to $2.07 billion, reflecting a 24.5% jump on a year-over-year basis.
The Small Business segment’s net sales of $467.1 million grew 38.6% year over year.
Coming to the Public segment, net sales of $2.15 billion declined 6.1% from the year-earlier quarter. Revenues from Education and Healthcare customers were up 2.4% and 30.9% respectively, while the same from Government customers plunged 32.9%.
Net sales in Other (Canadian and UK operations) improved 31.4% to $611.7 million.
CDW’s gross profit of $914.9 million climbed 10.8% on a year-over-year basis. However, the gross margin contracted 10 basis points (bps) to 17.3%, mainly on a lower product margin, partially offset by a higher mix of net service contract revenues, primarily Software as a Service and improved net sales of professional services.
The non-GAAP operating income grew 12.6% year on year to $435.1 million. Additionally, the non-GAAP operating margin advanced 10 bps to 8.2%.
Selling and administrative expenses rose 4.1% year over year to $529 million primarily due to higher sales payroll expenses, increased coworker count and higher performance-based compensation.
Meanwhile, net interest expenses fell 10% year over year to $36 million on the benefits from the August 2020 senior notes refinancing, a lower effective interest rate on term loans and reduced borrowings under the revolving credit facility.
Balance Sheet and Cash Flow
CDW exited the third quarter with cash and cash equivalents of $245.1 million compared with $501.2 million witnessed at the end of June 2021 and $1.25 billion seen at the end of the year-earlier quarter.
The multi-brand IT solutions provider has a long-term debt of $4.04 billion, slightly higher than $3.91 billion at the end of the second quarter.
CDW generated $636.7 million of cash flow from operational activities during the first nine months of 2021.
Separately, the company announced that its board of directors has authorized a quarterly cash dividend of 50 cents per share to be payable on Dec 10 to the shareholders of record date as of Nov 24. The newly-approved dividend rate is 25% higher than its last quarter’s dividend rate of 40 cents per share.
The long-term earnings growth rate for Applied Materials, Advanced Micro Devices and Perficient is currently pegged at 19.4%, 44.6% and 18%, respectively.
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CDW Corporation (CDW) Q3 Earnings Top, Revenues Miss Estimates
CDW Corporation (CDW - Free Report) delivered impressive third-quarter 2021 results. The company’s third-quarter non-GAAP earnings improved 16.4% year over year to $2.13 per share and surpassed the Zacks Consensus Estimate by 3.9%.
This year-over-year increase in the bottom-line result was primarily driven by higher revenues, lower interest expenses and share repurchases. The aforementioned factors were partially offset by an increase in the effective tax rate to 23.9% from 22.7% in the year-ago quarter.
The company’s revenues increased 11.4% year over year to $5.30 billion. However, quarterly revenues missed the consensus mark of $5.34 billion.
On a constant currency basis, sales improved 10.7%. Currency impact on top-line growth was primarily driven by the favorable currency exchange rates of the Canadian dollar and the British pound to the U.S. dollar.
This was the second consecutive time that the company has recorded more than $5 billion of quarterly revenues.
A rebound in commercial customer spending resulted in excellent performance, especially in Corporate, Small Business and CDW Canada. The improvements in Education and Healthcare channels were key positives in the quarter.
CDW Corporation Price, Consensus and EPS Surprise
CDW Corporation price-consensus-eps-surprise-chart | CDW Corporation Quote
Quarterly Details
Net sales of CDW’s Corporate segment amounted to $2.07 billion, reflecting a 24.5% jump on a year-over-year basis.
The Small Business segment’s net sales of $467.1 million grew 38.6% year over year.
Coming to the Public segment, net sales of $2.15 billion declined 6.1% from the year-earlier quarter. Revenues from Education and Healthcare customers were up 2.4% and 30.9% respectively, while the same from Government customers plunged 32.9%.
Net sales in Other (Canadian and UK operations) improved 31.4% to $611.7 million.
CDW’s gross profit of $914.9 million climbed 10.8% on a year-over-year basis. However, the gross margin contracted 10 basis points (bps) to 17.3%, mainly on a lower product margin, partially offset by a higher mix of net service contract revenues, primarily Software as a Service and improved net sales of professional services.
The non-GAAP operating income grew 12.6% year on year to $435.1 million. Additionally, the non-GAAP operating margin advanced 10 bps to 8.2%.
Selling and administrative expenses rose 4.1% year over year to $529 million primarily due to higher sales payroll expenses, increased coworker count and higher performance-based compensation.
Meanwhile, net interest expenses fell 10% year over year to $36 million on the benefits from the August 2020 senior notes refinancing, a lower effective interest rate on term loans and reduced borrowings under the revolving credit facility.
Balance Sheet and Cash Flow
CDW exited the third quarter with cash and cash equivalents of $245.1 million compared with $501.2 million witnessed at the end of June 2021 and $1.25 billion seen at the end of the year-earlier quarter.
The multi-brand IT solutions provider has a long-term debt of $4.04 billion, slightly higher than $3.91 billion at the end of the second quarter.
CDW generated $636.7 million of cash flow from operational activities during the first nine months of 2021.
Separately, the company announced that its board of directors has authorized a quarterly cash dividend of 50 cents per share to be payable on Dec 10 to the shareholders of record date as of Nov 24. The newly-approved dividend rate is 25% higher than its last quarter’s dividend rate of 40 cents per share.
Zacks Rank & Stocks to Consider
CDW currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the broader technology sector include Applied Materials (AMAT - Free Report) , Advanced Micro Devices (AMD - Free Report) and Perficient (PRFT - Free Report) , all carrying a Zacks Rank #2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The long-term earnings growth rate for Applied Materials, Advanced Micro Devices and Perficient is currently pegged at 19.4%, 44.6% and 18%, respectively.