CDW Stresses 'Balanced Growth,' Beats Estimates On 4Q Sales

CDW CEO Thomas Richards applauded his company's fourth-quarter results, calling it a "strong finish to a great year in both financial and strategic performance."

Richards emphasized that his company saw balanced growth, and not just one segment excelling, that led to a strong quarter.

"It was more balanced this quarter," Richards said on the call. "We saw strong growth from what you would think of from solutions as a storage perspective. We saw strong growth from the emerging brand and a lot of the flash technology. Our services practice has been really strong growth for us. Converged infrastructure includes network and also includes our security practice, which has been growing rapidly."

[Related: CDW: We're Confident We Can Continue Growth Trajectory After 'Terrific' 2014]

Richards did point to the company's "exceptional cloud growth" for a reason to be excited for 2015 and he expects continued growth, though there may be a shift in where the revenue comes from.

"My expectation for 2015 is that we'll return to a more normal rhythm than what we had in 2014," Richards said. "What we did see is that beginning in the third quarter, the solutions business began to really come back. We feel pretty good about heading into 2015. It's just a little bit of a shift about where the business comes from."

CDW reported adjusted earnings was 59 cents per share, beating analysts' estimates of 54 cents per share. Total net sales in the quarter rose by 12.4 percent from $2.71 billion last year to $3.05 billion in the three months ending Dec. 31, beating analysts' estimates of $2.96 billion. Gross profit was up 9.7 percent from $448.3 million a year ago to $491.9 million in the quarter.

CDW did report that net income was down to $51.8 million from $60 million for a drop of 13.8 percent from the prior-year quarter. Earnings declined from 30 cents per share from 35 cents a year ago.

Richards did say the health-care business grew at a slower rate than primarily anticipated but expects it to continue to grow at roughly the same rate.

"Health care this year for us grew about high single digits, 9 to 9.5 percent," he said. "We would expect health care to stay at mid-to-high single-digit growth. I think it will have some lumpiness because of the Affordable Care Act and that it's doing to drive up cost, causing consolidations. I think that would play in our favor because of the breadth of our footprint. Anytime you have consolidation, that causes people to pause and take cost out. On the whole, we still expect health care to be a good growth segment for us."

Going forward, Richards emphasized the expectation of the federal market returning to a "normal rhythm," which will be good for CDW's business, and added that the solution categories, cloud and K-12 business will continue to be areas of growth moving forward.

"We think the federal market is back on a normal rhythm again," he said. "You saw a nice year by our corporate gang. We feel pretty good heading into 2015. We expect solution categories to continue their second half of 2014 momentum into 2015 and anticipate a more balanced split in transactional and solution sales."

CDW's stock was up 1 percent at midday on Tuesday to 36.41.

PUBLISHED FEB. 10, 2015