EPAM Systems Faces Rough Waters Ahead; Stock Tanks

EPAM Systems, Inc. EPAM shares are diving after the company reported first-quarter FY24 results.

Sales declined 3.8% Y/Y to $1.165 billion, marginally beating the analyst consensus estimate of $1.161 billion.

On an organic constant currency basis, excluding the impact of the exit from Russia, revenues were down 4.8% Y/Y.

Adjusted income from operations was $173.6 million, down 2.6% Y/Y. The adjusted operating margin expanded 20 bps to 14.9%.

Adjusted EPS of $2.46, down 0.4% Y/Y, beat the consensus of $2.31.

Operating cash flow stood at $129.9 million in the quarter. EPAM held $1.99 billion in cash and equivalents as of March-end. 

Arkadiy Dobkin, CEO, said, “Our solid performance in the first quarter of 2024 reflects our level of adaptability to a challenging demand environment, which we now believe is unlikely to improve this year to the degree we expected one quarter ago.”

Outlook: For the second quarter, EPAM expects revenues of $1.135 billion-$1.145 billion, below the consensus of $1.18 billion, and an adjusted EPS of $2.21-$2.29 versus an estimated $2.44.

EPAM Systems lowered its FY24 revenue outlook to $4.575 billion-$4.675 billion (from $4.74 billion – $4.88 billion) vs. consensus of $4.81 billion.

Also, the company revised the FY24 outlook for adjusted EPS to $10.00-$10.30 (from $10.00-$10.40 earlier) vs the $10.18 estimate.

Investors can gain exposure to the stock via Vesper US Large Cap Short-Term Reversal Strategy ETF UTRN.

Price Action: EPAM shares are up 21.8% at $195.00 at the last check Thursday.

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