CDW CEO Richards: Health-Care Market Will Remain 'Lumpy' For 2015

CDW CEO Tom Richards said Thursday that he expects his company's business in the health-care market to remain "lumpy" this year after it posted sales slightly below Wall Street expectations for the first quarter ended March 31.

Shares of the $12 billion solution provider behemoth were down 4 percent in midday trading to $37.15 after the company posted sales of $2.76 billion, $120 million off the Thomson Reuters Wall Street consensus of $2.88 billion.

CDW reported better-than-expected earnings of 56 cents per share, beating the Thomson Reuters Wall Street consensus of 53 cents per share. Profits for the Vernon Hills, Ill.-headquartered company were up 7.5 percent to $54.7 million compared with $50.9 million in the year-ago quarter.

[Related: Channel Star: Former CDW Employee Fights For Top Spot On 'American Idol']

Sales overall for the quarter were up 3.9 percent to $2.75 billion compared with $2.65 billion in the first quarter of last year.

Health care, CDW's richest market in the public sector, was down 5.2 percent from last year to $373.6 million from $394.1 million in the prior year. In its last earnings call for the fourth quarter of 2014, CDW reported its health-care sales were up 1 percent on the quarter, and were up 9.6 percent on the year.

This morning, Richards said he expects the health-care business to "bounce around," in part because recent health-care mergers have put IT budgets under pressure impacting CDW sales.

"I think technology will be an important part of some of the efficiencies and effectiveness, but at least in our customer base, we've had a number of mergers," Richards said on a call with Wall Street analysts. "When those mergers happen, you're going through the process of integrating the two companies, creating synergies and cutting costs."

When the dust settles, Richards said he sees health care as a growth market for CDW. "The opportunities are really significant," he said. "I just think it will be a little bit of a lumpy market for the rest of this year."

Despite the decline in health-care IT sales, Richards said he sees the public segment continuing to grow going forward, fueled by the education and government businesses.

In the federal market, CDW reported $288.6 million in sales, up 13.5 percent from $254.2 million in the year-ago quarter. Sales in the education space were up 6.8 percent to $343.6 million from $321.6 million in the first quarter last year.

PUBLISHED MAY 7, 2015