What's Going On With EPAM Systems Stock Friday?

Zinger Key Points
  • EPAM Systems shares gain in premarket on Friday, recovering from a 27% drop post-Q1 results yesterday.
  • Operational challenges and lowered FY24 outlook underscore market concerns despite strategic moves.

EPAM Systems, Inc. EPAM shares are trading higher in the premarket session on Friday after ending yesterday’s session with a whopping 27% slump.

Yesterday, while reporting the first-quarter FY24 results, the company’s sales declined 3.8% year over year to $1.165 billion, marginally beating the analyst consensus estimate of $1.161 billion.

In an exchange filing, the company said: “Our business and operating results were negatively impacted in the first three months of 2024 by uneven demand for our services as our clients took action to reduce their spending on information technology services.”

During the quarter, the company completed two acquisitions with a total purchase price of $53.7 million, including contingent consideration with an acquisition-date fair value of $7.3 million. 

These acquisitions expanded the company’s geographical reach across Latin America and Europe, as well as added $16.6 million of intangible assets.

The company repurchased 396 thousand shares of its common stock for $120.6 million during the first quarter of 2024 under its share repurchase program.

Income from operations as a percentage of revenues decreased to 9.5% from 9.9% in the year-ago period, largely driven by an increase in compensation costs, including stock-based compensation expense as a percentage of revenues. 

 Non-GAAP income from operations declined by 2.6% compared to the first quarter of 2023, indicating operational challenges.

Cash and equivalents totaled $1.990 billion as of March-end, a decrease of 2.6% from $2.043 billion as of December-end. The company’s long-term debt totaled $25.787 million.

EPAM Systems lowered its FY24 revenue outlook to $4.575 billion-$4.675 billion (from $4.74 billion – $4.88 billion). Also, the company revised the FY24 outlook for adjusted EPS to $10.00-$10.30 (from $10.00-$10.40 earlier).

Despite strategic acquisitions and share repurchases, decreased income from operations, coupled with a lowered revenue-adjusted EPS outlook for FY24, contributed to market concerns, underscoring the company’s current hurdles in navigating demand fluctuations and cost pressures.

Price Action: EPAM shares are trading higher by 0.61% to $183.04 premarket at last check Friday. 

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