Despite Record Levels, CDW Stock Still Has Room to Run
CDW Corporation (NASDAQ:CDW) has been having an excellent year. Not only has the company reported record net sales in every quarter of 2019, CDW stock is up approximately 42% year-over-year and has advanced 60% since the start of 2019.
Thanks to the company’s top-line growth and profitability, as well as a strong outlook, CDW stock still has lots of room to run.
CDW Corporation Overview
CDW Corporation isn’t exactly what you’d call an overlooked tech stock. As a Fortune 500 and S&P 500 company, it’s an industry juggernaut.
CDW provides integrated information technology (IT) solutions to over 250,000 business, education, government, and healthcare clients in the U.S., Canada, and the United Kingdom. (Source: “Investor Fact Sheet,” CDW Corporation, last accessed October 31, 2019.)
The company’s broad array of products range from discrete software and hardware to IT solutions including cloud computing, data center optimization, mobility, security, and virtualization. Its technology portfolio is made up of over 100,000 products.
CDW Corporation is a big company with a market cap of $18.6 billion and more than $17.0 billion in annual revenue.
That might scare some investors away. After all, how much bigger can CDW really get? The company actually has lots of room to grow. It currently only holds about five percent of its addressable $325.0-billion market in the U.S., Canada, and U.K.
CDW Stock Information
|Market Cap||$18.6 Billion|
|Shares Outstanding||144.7 Million|
|50-Day Moving Average||$121.85|
|200-Day Moving Average||$112.64|
(Source: “CDW Corporation (CDW),” Yahoo! Finance, last accessed November 1, 2019.)
CDW stock has been trending higher since the end of December 2018.
In addition to enjoying momentum from the “January Effect” on steroids, the stock was fueled by investor optimism following record fourth-quarter and year-end results (announced February 7), record first-quarter net sales (announced May 1), record second-quarter net sales (announced July 31), and record third-quarter net sales (announced October 31).
CDW Corporation continues to have a strong outlook, which should help CDW stock enjoy the fruits of the January Effect in 2020.
Chart courtesy of StockCharts.com
Another Record Quarter, Crushing Third-Quarter Estimates
On October 31, CDW announced that its total net sales for the third quarter (ended September 30) increased 12.2% year-over-year to a record $4.9 billion. On an average daily basis, its net sales grew by 10.5%, and on a constant-currency basis, its net sales grew by 10.9%. (Source: “CDW Reports Record Third Quarter Net Sales,” CDW Corporation, October 31, 2019.)
The company’s third-quarter gross profit was $816.0 million, up 14.4% from $714.0 million in the same quarter last year. Operating income was $321.0 million, up 16.7% from $275.0 million in the same prior-year period.
Third-quarter net income was $202.0 million ($1.37 per share), a 9.8% increase from the $184.0 million ($1.20 per share) in the same period last year.
Adjusted net income came in at $1.70 per share, versus $1.42 in the third quarter of 2018. Wall Street was expecting CDW Corporation to report adjusted earnings of $1.58 per share.
In addition to reporting excellent third-quarter and year-to-date results, CDW also announced that its board of directors approved a 28.8% increase to its quarterly cash dividend.
The $0.38 dividend will be paid on December 10 to all shareholders of record as of the end of the business day on November 25.
What’s not to love about CDW Corporation? True, CDW stock is not exactly what you’d call cheap, but it continues to reward buy-and-hold investors.
The company delivered record net sales in the last three quarters of 2016, every quarter in 2017, and every quarter in 2018. CDW has continued its winning ways in 2019, recording record first-quarter, second-quarter, and third-quarter net sales.
In the just-completed third quarter, the company’s excellent operating results were augmented by share repurchases, which delivered a 20% boost in adjusted net income per diluted share.
Given CDW’s strong year-to-date results, it is now targeting full-year growth in the mid-teens for its constant-currency adjusted net income per diluted share.