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Analysts expect the company to deliver an organic revenue compound annual growth rate of at least 6% over the next several years and an earnings per share compound annual growth rate of at least 10%. UBS also thinks the company is likely to pursue acquisitions or increase buybacks.
The analysts explained, “Through a pivot to more software and service centric offerings, we forecast CDW organic revenue CAGR of at least 6% over the next several years following a modest decline in CY23. In addition, mix to more margin rich ‘netted’ down Software & Services in gross profit should drive operating leverage and at least a 10% EPS CAGR.”
They added, “CDW’s de-levered balance sheet post the Sirius Computer acquisition and strong free cash flow generation create optionality as the company is likely to pursue incremental accretive transactions targeting faster growth solutions, or allocate an incremental $300-$400M (1%-2%) towards buybacks not reflected in our CY24 and CY25 EPS forecasts.”
CDW Corporation was one of the best performers in the S&P 500 Tuesday following the Buy rating from UBS. Shares climbed 1% despite a decline of 1.4% in the S&P 500 index.
