EPAM Systems EPAM reported third-quarter 2024 non-GAAP earnings of $3.12 per share, beating the Zacks Consensus Estimate by 15.5%. The bottom line increased 14% year over year.

EPAM’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with an average surprise being 9.9%.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

EPAM’s third-quarter revenues of $1.168 billion surpassed the consensus mark by 1.39%. 

EPAM’s top line rose 1.3% year over year, demonstrating an improvement across its business segments, primarily benefiting from its latest technological innovations enabled by Gen AI.

Buoyed by stronger-than-expected top and bottom-line results, EPAM raises its fourth-quarter and full-year 2024 guidance, which is expected to pull up its shares modestly. Shares of EPAM were up more than 0.89% as of pre-market data.

On a year-to-date basis, shares of EPAM plunged 21.6% against the Zacks Computers - IT Services industry’s return of 14.2%.

EPAM’s Q3 Details

EPAM Systems’ year-over-year top-line growth was driven by the performances across its industry verticals, such as Financial Services, Software & Hi-Tech, Life Sciences and Emerging, partially offset by softness in the Business Info and Travel & Consumer.

Revenues from Financial Services (21.8% of total revenues) were $255 million, up 3.3% year over year. 

Third-quarter revenues from Consumer Goods, Travel and Retail (21.5% of total revenues) were $251 million, down 4.5% year over year. 

Revenues from Software and Hi-Tech (15.2% of total revenues) in the third quarter were $178 million, up 2.1% year over year. 
 

Revenues from Life Science and Health (12.2% of total revenues) were $142 million, up 14.6% year over year. 

Revenues from Business Info and Media (14.4% of total revenues) were $168 million, down 9% year over year. 

Revenues from Emerging (14.9% of total revenues) were $174 million, up 8.5% year over year. 

EPAM Systems’ non-GAAP gross profit increased 5.8% year over year to $400.8 million, while the gross margin expanded 140 basis points (bps) to 34.3%.

The non-GAAP operating income witnessed 14% year-over-year growth to $222.9 million. The non-GAAP operating margin expanded 210 bps to 19.1% mainly due to the recognition
of $29.1 million of incentives related to research and development activities performed in Poland in 2024.

EPAM’s Balance Sheet & Cash Flow

As of Sept. 30, 2024, EPAM had cash, cash equivalents and restricted cash of $2.04 billion, higher than $1.98 billion as of June 30, 2024

Long-term debt was $25.3 million as of Sept. 30, slightly lower than $25.5 million as of June 30.

Cash flow from operations was $242 million, while free cash flow was $237 million. Cash provided by operating activities was $428.9 million for the first nine months of 2024.

EPAM Raises Q4 and FY24 Guidance

For the fourth quarter, EPAM expects revenues to be in the band of $1.205-$1.215 billion, reflecting year-over-year growth of 4.6% at the midpoint of the range.

The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $1.15 billion, suggesting a year-over-year fall of 0.2%.

Non-GAAP operating margin is anticipated to be in the range of 16-17% of revenues. Non-GAAP earnings are expected between $2.70 and $2.78 for the fourth quarter.

The Zacks Consensus Estimate for earnings is pegged at $2.70 per share, indicating a year-over-year decline of 1.8%.

EPAM updated its guidance for full-year 2024. It now expects revenues to be in the range of $4.685-$4.695 billion, up from the previous guidance of $4.59-$4.625 billion.

The Zacks Consensus Estimate for revenues is pegged at $4.62 billion, suggesting a year-over-year fall of 1.6%.

Non-GAAP operating margin is expected to be in the range of 16-16.5% of revenues. Non-GAAP earnings are now expected between $10.73 and $10.81, up from the previous guidance of $10.20-$10.40 per share.

The Zacks Consensus Estimate for earnings is pegged at $10.31 per share, indicating a year-over-year decline of 2.6%.

Zacks Rank & Other Stocks to Consider

Currently, EPAM carries a Zacks Rank #2 (Buy) at present.

Shopify SHOP, Blackline BL and CyberArk Software CYBR are some other top-ranked stocks that investors can consider in the broader Zacks Computer & Technology sector. 

SHOP, BL and CYBR sport a Zacks Rank #1 (Strong Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

SHOP shares have appreciated 9.8% year to date. Shopify is set to report third-quarter 2024 results on Nov. 12.

BL shares have lost 4.8% year to date. Blackline is slated to report third-quarter 2024 results on Nov. 7.

CYBR shares have jumped 35.2% year to date. CyberArk Software is set to report third-quarter 2024 results on Nov. 13.

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