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Bull of the Day: PC Connection (CNXN)


Headquartered in Merrimack, New Hampshire, PC Connection, Inc. (CNXN) directly markets brand-name personal computers and related equipment, software, and networking products to business, education, and consumer customers throughout the United States.

Q2 Earnings Better-Than-Expected

Earnings of 89 cents easily beat the Zacks Consensus of 70 cents per share, and net income hit a quarterly record of $23.7 million, growing nearly 30% year-over-year. Revenue of $741 million also surpassed our consensus estimate, up about 5% from the year-ago quarter.

Breaking it down by segment, Business Solutions saw sales of $271.1 million thanks to strong growth in sales of desktops, servers/storage, and software products. Public Sector Solutions hit revenue of $152 million, an increase of 12.2%, while Enterprise Solutions grew by 5.6% to $318 million.

PC Connection’s largest category, notebook/mobility sales, grew 14% year-over-year and accounted for 29% of net sales in Q2.

“Our increased productivity and improved execution allowed us to deliver a 31.3% increase in diluted earnings per share,” said CEO and President Tim McGrath. “The Company achieved record gross profit, gross margin, and net income this quarter.”

PC Connection Price and Consensus

PC Connection, Inc. Price and Consensus

Year-to-date, CNXN stock is up around 19.5%.

Estimates have been rising lately too, pushing the stocks towards a Zacks Rank #1 (Strong Buy).

For the current fiscal year, PC Connection’s earnings growth is expected to grow 15.19% year-over-year. Two analysts have revised their estimate upwards in the past 60 days, and the Zacks Consensus Estimate has moved 23 cents higher from $2.50 to $2.73 during the same time frame.

2020 looks pretty strong too, and earnings are expected to grow about 4.2%; next year’s consensus estimate sits at $2.85 cents per share, with eight upward revisions and up by 19 cents in the last 60 days.

Bottom Line

As more people, businesses, and governments look to expand their digital presence, it will be companies like PC Connection that will more in demand in ever, especially as technologies like cloud computing, AI, “Big Data,” and blockchain grow.

If you’re an investor looking for a broad retail stock to add to your portfolio, make sure to keep CNXN on your shortlist.

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