CDW Hikes Dividend By 5.3% As 3Q Sales Top Estimates


Shares of CDW Corp. closed 3.1% higher on Monday after the technology products and solutions provider reported stronger-than-expected 3Q results. Its adjusted EPS increased 8% to $1.83 year-over-year and came way ahead of analysts’ expectations of $1.51. The 3Q earnings beat came on the back of improved product margin and lower adjusted effective tax rate.

CDW’s (CDW) 3Q revenues fell 3.1% to $$4.76 billion year-on-year but surpassed Street estimates of $4.58 billion.

CDW’s gross profit margin improved 80 basis points to 17.4% “primarily due to increased product margin and the mix of netted down revenues that are booked net of cost of goods sold, primarily software as a service.” The adjusted effective tax rate for the quarter was 23.3%, 250 basis points lower than the year-ago quarter.

Together with the earnings release, CDW announced that its board of directors has approved a 5.3% increase in quarterly cash dividend. The cash dividend of $0.40 per share will be payable on December 10 to shareholders of record date as of November 25. (See CDW stock analysis on TipRanks).

Following the results, Raymond James analyst Adam Tindle maintained his Buy rating and a price target of $150 (about 18.6% upside potential). Tindle is impressed with CDW’s “much better than anticipated gross/operating margin” performance. The analyst said that “We suspect investor attention may turn to a battle between bears focused on how CDW can grow as PC/WFH (Personal Computer/Work From Home) tailwinds attenuate, while bulls see this as an opportunity for CDW to disclose more about its recurring gross profit streams, which are growing rapidly/ contributing to margin upside, and M&A (Merger & Acquisition) could further aid this healthy trend.”

Currently, the Street has a bullish outlook on the stock with a Strong Buy analyst consensus. With shares down nearly 11.5%, the average price target of $138.25 implies upside potential of about 9.3% to current levels.

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