Now that Christmas is out of the way, it's time for that other "most wonderful time of the year" -- year-end earnings season, when those companies whose fiscal years align sensibly with the calendar version report their Q4 and full-year results. Next up is computer vendor CDW (NASDAQ:CDWC), which reports bright and early Friday morning.

What analysts say:

  • Buy, sell, or waffle? The analysts following CDW number an unlucky 13, and true to form, only three of them think the stock's a buy at today's price. All the rest say "hold."
  • Revenues. On average, the analysts are looking for 13% sales growth, to $1.8 billion.
  • Earnings. Profits are predicted to rise only 6%, however, to $0.91 per share.

What management says:
Impressed with its own success in driving public sector sales by "segmenting" its customers into discrete groups, with specific sales reps assigned to each, CDW is now trying to apply the strategy to its corporate clients. Last quarter's results help to explain both CEO John Edwardson's enthusiasm for the strategy -- public sector sales were up 17.6% -- and the need to try this out in the corporate sector, where sales slid 2.5% year over year last quarter.

Says Edwardson: "By segmenting most of our medium and large corporate customers into geographic regions, and organizing our corporate sales teams accordingly ... medium and large corporate sector account managers are continuing to build relationships with customers whose accounts have been transferred into regions."

What management does:
Sounds a bit like shuffling deckchairs (if not necessarily on the Titanic) to me, but there's no denying the strategy has sales growing nicely, and gross margins expanding steadily at CDW. Although it's true that operating margins have slipped somewhat this year, CDW explains this as being the cost of (1) building up its infrastructure to support future growth, (2) hiring new salespeople, and (3) rewarding those salespeople with higher commissions for keeping those profitable sales coming.

Margins %

6/05

9/05

12/05

3/06

6/06

9/06

Gross

15.2

15.2

15.4

15.5

15.7

15.8

Op.

6.8

6.7

6.7

6.6

6.6

6.6

Net

4.2

4.3

4.3

4.3

4.3

4.3
All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
Tom Gardner, co-analyst for Motley Fool Stock Advisor, and the man who picked CDW for our portfolio nearly two years and 34 percentage points worth of profit ago, calls CDW "extremely well-run." According to Tom, its "return on invested capital is stellar, and the balance sheet is strong enough." CDW stumbles on on sales growth, says Tom; it's not matching up with his projections.

But with the stock outperforming the S&P by nine percentage points since he first picked it, is Tom being too hard on CDW? Hardly. I expect CEO Edwardson, too, is less than thrilled with the firm's sales. In our interview back in August of last year, he reiterated CDW's goal of making $10 billion worth of annual sales by the end of 2008. With analysts currently projecting no more than $7.8 billion in revenue this year, the firm will need to more than double its growth rate to meet that goal.

So is CDW still a buy in Tom's book? You can find out, free of charge, just for taking a trial run of the Stock Advisor service. Click here for full access.

Competitors:

  • Dell (NASDAQ:DELL)
  • Hewlett-Packard (NYSE:HPQ)
  • PC Connection (NASDAQ:PCCC)

Recent Fool news on CDW includes:

Dell is both a Stock Advisor and an Inside Value pick.

Fool contributor Rich Smith does not own shares of any company named above.