EPAM Systems (EPAM) Beats on Q3 Earnings and Revenue Estimates
EPAM Systems EPAM reported better-than-expected third-quarter 2023 results. The company’s third-quarter non-GAAP earnings of $2.73 per share beat the Zacks Consensus Estimate of $2.56. However, the figure decreased by 11.9% year over year.
Revenues were $1.15 billion, which surpassed the consensus mark of $1.14 billion. However, the top line declined 6.1% year over year. On a constant-currency (cc) basis, the top line was down 8%. The year-over-year decline in revenues reflects the negative impacts of a slowdown in IT spending in the ongoing uncertain macroeconomic environment.
Geography-wise, EPAM generated 58.7% of the total revenues from the Americas, down 9.3% year over year. However, revenues from the EMEA, contributing 38.7% to total revenues, increased 1.8% year over year.
Sales in the Asia Pacific region declined 20.2% year over year and accounted for 2.2% of revenues. Central and Eastern Europe, representing 0.4% of revenues, plunged 66.4% year over year.
EPAM Systems, Inc. Price, Consensus and EPS Surprise
EPAM Systems, Inc. price-consensus-eps-surprise-chart | EPAM Systems, Inc. Quote
Quarterly Details
Segment-wise, Business Information & Media declined 12% year over year to $184 million and accounted for 16% of the company’s revenues.
Financial Services decreased 3.3% on a year-over-year basis to $247 million and accounted for 21.4% of revenues.
While Software & Hi-Tech was down 15.1% to $174 million, Travel & Consumer declined 6.2% to $263 million. Software & Hi-Tech and Travel & Consumer accounted for 15.1% and 22.8% of revenues, respectively.
Life Science & Healthcare fell by 4.2% year over year to $124 million and accounted for 10.8% of revenues. The Emerging Verticals segment improved by 8.5% year over year to $160 million and contributed 13.9% to revenues.
EPAM’s non-GAAP gross profit plunged 10.9% to $379 million, while the gross margin expanded 150 basis points (bps) to 32.9%. The non-GAAP operating income decreased 15.8% year over year to $195.6 million. The non-GAAP operating margin contracted by 190 bps to 17%.
Balance Sheet and Cash Flow
As of Sep 30, 2023, EPAM had cash, cash equivalents and restricted cash of $1.88 billion, up from $1.78 billion as of Jun 30, 2023.
As of Sep 30, 2023, the long-term debt was $27.5 million, up from $25.9 million as of Jun 30, 2023.
In the third quarter, EPAM generated operating and free cash flows of $214.9 million and $211.3 million, respectively. In the first nine months of 2023, the company generated operating and free cash flows of $391.3 million and $372.9 million, respectively.
Guidance
EPAM provided guidance for the fourth quarter of 2023. The company estimates reporting revenues between $1.13 billion and $1.14 billion, suggesting a year-over-year decline of 8% at the midpoint of the guidance range.
Management projects the non-GAAP operating margin in the 15-16% range. Non-GAAP earnings are expected in the range of $2.47-$2.55 per share.
For 2023, the company now projects revenues in the range of $4.663-$4.673 billion instead of the previous range of $4.65-$4.70 billion. EPAM now forecasts non-GAAP earnings guidance in the $10.31-$10.39 per share range, up from the earlier projection of $9.90-$10.10 per share. However, the company still forecast its non-GAAP operating margin guidance between 15% and 16% for 2023.
Zacks Rank & Stocks to Consider
Currently, EPAM carries a Zacks Rank #3 (Hold). Shares of EPAM have plunged 33.9% year to date (YTD).
Some better-ranked stocks from the broader technology sector are Palo Alto Networks PANW, NVIDIA Corporation NVDA and Splunk SPLK. Palo Alto and NVIDIA each sport a Zacks Rank #1 (Strong Buy), while Splunk carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today's Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Palo Alto Networks' first-quarter fiscal 2024 earnings has remained unchanged at $1.28 per share in the past 60 days. For fiscal 2024, earnings estimates have remained unchanged at $5.34 per share in the past 60 days.
Palo Alto Networks’ earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 22.2%. Shares of PANW have surged 75.5% YTD.
The Zacks Consensus Estimate for NVIDIA’s third-quarter fiscal 2024 earnings has been revised a penny northward to $2.10 per share in the past 60 days. For fiscal 2024, earnings estimates have moved 7 cents upward to $10.74 per share in the past 30 days.
NVIDIA’s earnings beat the Zacks Consensus Estimate thrice in the preceding four quarters while missing on one occasion, the average surprise being 9.8%. Shares of NVDA have surged 189.6% YTD.
The Zacks Consensus Estimate for Splunk's third-quarter fiscal 2024 earnings has been revised upward by 4 cents to 46 cents per share in the past 60 days. For fiscal 2024, earnings estimates have moved upward by 2 cents to $3.78 per share in the past 60 days.
Splunk’s earnings beat the Zacks Consensus Estimate in the preceding four quarters, the average surprise being 154.9%. Shares of SPLK have risen 70.6% YTD.
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