ZacksZacks Equity Research·4 min readIn this article:
Shares of CDW Corporation CDW have soared 48.6% compared with the industry’s growth of 0.9% in the past year. The company is gaining from an improved operating margin, lower interest expenses and a reduction in the effective tax rate. It is witnessing strong demand for products that enable remote working and operations continuity plans.
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Earnings estimates for the current and next fiscal have increased 0.3% and 1.4%, respectively, in the past two months. With impressive growth potential and robust fundamentals, this Zacks Rank #2 (Buy) integrated information technology solutions provider is an enticing investment option at the moment. CDW pulled off a trailing four-quarter earnings surprise of 12.2%, on average.
Key Drivers
Headquartered in Lincolnshire, IL, CDW is a leading provider of IT solutions to small, medium and large business, government and healthcare customers based in the United States, the United Kingdom and Canada. Its solutions are delivered in physical, virtual and cloud-based environments through more than 6,000 customer-facing coworkers, including sellers and highly-skilled technology specialists.CDW has four operating segments, namely Corporate, Small Business, Public and Other. It offers discrete hardware and software products to integrated IT solutions businesses such as mobility, security, data center optimization, virtualization and collaboration. Its hardware products include network communications, video monitors, enterprise and data storage. Software products are application suites, security, virtualization, operating systems and network management.The company also delivers services such as warranties, managed services, consulting design and implementation. With growth across customer end markets, CDW is benefiting from the ongoing digital transformation and coronavirus-led work-from-home wave. It is registering strong revenue growth in product categories, including collaboration tools and enterprise storage. It is worth mentioning that the company is witnessing earnings growth at a faster rate, courtesy of its share repurchase initiatives.Moreover, CDW’s robust product portfolio and frequent product refreshes act as tailwinds. Backed by a healthy IT spending environment, the company has been expanding its solutions suite and services capabilities to cater to the accretive requirements of customers. Solid demand for consumer devices like notebooks and chromebooks plus servers is an upside for the company. Growth in software and services is also proving quite beneficial for CDW.When it comes to accelerating its organic growth, the company is focused on strategic acquisitions. Recently, it acquired Amplified IT, a Google Premium education partner. Further, the buyout of Scalar Decisions in January 2019 has broadened CDW Canada’s solutions portfolio, deepened technical skillset and extended its geographic reach. The buyout of Kelway TopCo (later rebranded it to CDW UK) in August 2015 improved its ability to provide IT solutions for U.S.-based customers. CDW believes that its addressable markets in the United States, the United Kingdom and Canada represent more than $325 billion in annual sales.
Other Stocks to Consider
Endava plc DAVA is another top-ranked stock in the industry, sporting a Zacks Rank #1 (Strong Buy). The consensus estimate for current-year earnings has been revised 6.8% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.Endava delivered a trailing four-quarter earnings surprise of 15.2%, on average. The stock has returned 71% in the past year.ASGN Incorporated ASGN carries a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings has been revised 3.3% upward in the past 90 days.ASGN delivered a trailing four-quarter earnings surprise of 7.6%, on average. The stock has gained 33.8% in the past year.Microsoft Corporation MSFT also has a Zacks Rank #2, at present. The consensus estimate for current-year earnings has been revised 0.1% upward over the past 60 days.Microsoft delivered a trailing four-quarter earnings surprise of 14.8%, on average. The stock has rallied 46.2% in the past year. MSFT has a long-term earnings growth expectation of 12%.
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