CDW Corporation Struggles Amid Tech Market Surge
CDW Corporation (CDW), based in Vernon Hills, Illinois, is a leading technology solutions provider serving business, government, education, and healthcare sectors. With a market cap of $23.6 billion, CDW offers a diverse assortment of hardware, software, and integrated IT services, aiding organizations in navigating the digital landscape.
Stark Contrast in Stock Performance
Over the past year, CDW’s shares have notably underperformed compared to the overall market. The stock has dropped 17.8%, while the S&P 500 Index ($SPX) has seen impressive growth of nearly 31.8%. In 2024, CDW’s stock further declined by 22.3%, in stark contrast to the 25.8% gains of the S&P 500 on a year-to-date basis.
Looking at specific sectors, CDW also trailed behind the Technology Select Sector SPDR Fund’s (XLK) 25.6% increase over the past 52 weeks and a 20.3% gain year-to-date.
Challenges Impacting Performance
The company’s performance has been hindered by difficulties within its hardware solutions segment. Factors such as prolonged sales cycles, uncertainties in the macroeconomic landscape, and heightened competition have compounded challenges. Notably, a 12% decline in government sales in the public sector has negatively impacted results.
On October 30, CDW’s stock took an 11.3% hit following the release of mixed third-quarter results. The company reported an adjusted EPS of $2.63 and revenue of $5.5 billion, both below market expectations. While the gross margin remained stable at 21.8%, non-GAAP operating income and net income per share declined by 4% and 3%, respectively. As for the outlook for the rest of 2024, CDW anticipates flat U.S. IT market conditions and a slight decrease in gross profit.
Analysts’ Perspectives and Future Outlook
For the current fiscal year ending in December, analysts project CDW’s EPS will decline by 5.8% to $8.99 on a diluted basis. The company’s earnings history reveals mixed results, with three misses out of the last four quarters, contrasted with one positive surprise.
Among the 12 analysts monitoring CDW, the consensus rating stands at “Moderate Buy.” This includes six “Strong Buy” ratings, one “Moderate Buy,” and five “Holds.”
Compared to a month prior, this outlook appears more optimistic, with five analysts recently suggesting a “Strong Buy.”
On November 15, Redburn-Atlantic initiated coverage of CDW Corporation with a “Buy” rating and a price target of $230. The firm pointed to CDW’s robust product positioning and growth potential in the underpenetrated UK market as key factors in their positive outlook. While they acknowledge some short-term weaknesses, they anticipate that CDW will benefit from a recovery in discretionary spending.
Redburn-Atlantic believes that CDW’s strong product lineup and market presence will drive future earnings upgrades and potentially a rerating of its stock. The mean price target of $227.64 reflects a significant 28.8% premium compared to CDW’s current price, while the highest street target of $250 indicates a potential upside of 41.4%.
On the date of publication, Kritika Sarmah did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information, please view the Barchart Disclosure Policy here. More news from Barchart
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