Q3 Earnings Preview for CDW (NasdaqGS:CDW)

in EARNINGS/INVESTING IDEAS by

CDW Corporation (NasdaqGS:CDW) is scheduled to report Q3 earnings results on November 2, 2020.

The company is expected to report earnings of $1.50/share on revenue of $4.559 billion. The consensus earnings per share (EPS) of $1.50/share is based on a poll of 11 analysts and represents a decline in eps of −11.7% over the same quarter last year, when the company reported earnings of $1.70/share.

The revenue forecast of $4.559 billion based on a poll of 9 analysts implies a year-over-year (YoY) decline in revenue of −7.1%. Last year the company reported $4.908 billion in revenue for the quarter.

Expected to report EPS contraction of −11.7% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $4,558.77 $4,907.70 −7.1%
EPS $1.50 $1.70 −11.7%

Earnings Call Trends

Historically, management has exceeded analyst expectations 7 out of the last 8 tracked quarters, and met expectations 1 quarters.

What are your expectations from CDW Corporation for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $1.38 $1.56 12.7% Beat
Q1, 2020 $1.38 $1.38 −0.2% Missed
Q4, 2019 $1.48 $1.57 6.2% Beat
Q3, 2019 $1.58 $1.70 7.6% Beat
Q2, 2019 $1.52 $1.60 5.5% Beat
Q1, 2019 $1.11 $1.24 11.7% Beat
Q4, 2018 $1.21 $1.32 8.8% Beat
Q3, 2018 $1.34 $1.42 6.3% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by falling −4.0%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 5, 2020 $119.52 $114.79 −4.0% Decline
May 6, 2020 $109.99 $106.67 −3.0% Decline
February 6, 2020 $136.04 $132.66 −2.5% Decline
October 31, 2019 $127.38 $131.20 3.0% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.72, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.72 implies a 0.3% chance of earnings manipulation.

Fundamentals And Technical Analysis

CDW Corporation is currently trading at $125.67/share, down −3.3% for the day. The company is trading at approximately 86.0% of its 52-week high of $146.09/share. The company’s stock price is up 9.5% since the last earnings report and down −2.8% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 55.23 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:CDW Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 24.09 and a forward P/E multiple of 21.94.

CDW Corporation’s current share price also implies a price-to-book (P/B) multiple of 16.98. The following table summarizes some other key fundamental ratios:

Data as of October 27, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $125.67
P/E Ratio 24.1x
P/E Ratio (Fwd) 21.9x
PEG Ratio 2.2
Total Debt / Total Capital 19.6%
Levered Free Cash Flow $836.1 million
EV / EBITDA 14.4x

Finbox

CDW Corporation is a large-cap stock with a market capitalization of $17.929 billion and a total enterprise value of $21.487 billion. The company operates in the Information Technology sector and the Electronic Equipment, Instruments & Components industry.

CDW Corporation provides integrated information technology (IT) solutions to business, government, education, and healthcare customers in the United States, the United Kingdom, and Canada. It operates through three segments: Corporate, Small Business, and Public. The company offers discrete hardware and software products, as well as integrated IT solutions, including mobility, security, data center optimization, cloud computing, virtualization, and collaboration. Its hardware products comprise notebooks/mobile devices, network communications, desktop computers, video monitors, enterprise and data storage products, printers, and servers; and software products include application suites, security, virtualization, operating systems, and network management. The company also provides warranties, managed services, and consulting design and implementation services. CDW Corporation was founded in 1984 and is based in Lincolnshire, Illinois.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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