EPAM Q4 Earnings Beat Estimates: What's in Store for the Stock?

Core Viewpoint - EPAM Systems reported strong fourth-quarter results for 2024, with earnings and revenues exceeding expectations, but provided disappointing guidance for 2025, leading to a decline in share price over the past year [1][3]. Financial Performance - EPAM's fourth-quarter non-GAAP earnings were $2.84 per share, beating the Zacks Consensus Estimate by 3.3%, and increased from $2.75 per share in the same quarter last year [1]. - The company's revenues for the fourth quarter reached $1.25 billion, surpassing the consensus mark by 3.3%, and reflecting a year-over-year growth of 7.9% [2]. - Non-GAAP gross profit increased by 5.3% year over year to $402.1 million, while the gross margin contracted by 80 basis points to 32.2% [6]. Segment Performance - Revenue growth was driven by various industry verticals, with Financial Services generating $280.9 million (up 15.9% year over year) and Emerging revenues at $211.8 million (up 24.8% year over year) [4][5]. - However, revenues from Consumer Goods, Travel, and Retail declined by 3% year over year to $250.6 million [4]. Guidance and Estimates - For Q1 2025, EPAM expects revenues between $1.275 billion and $1.29 billion, indicating a year-over-year growth of 10% at the midpoint, while the Zacks Consensus Estimate is $1.27 billion [9]. - The company anticipates non-GAAP earnings for Q1 to be between $2.22 and $2.32 per share, below the Zacks Consensus Estimate of $2.57 per share [10]. - For the full year 2025, EPAM expects revenue growth of 10.0-14.0%, with a consensus estimate of $4.69 billion, indicating minimal year-over-year growth of 0.04% [10]. Balance Sheet and Cash Flow - As of December 31, 2024, EPAM had cash and cash equivalents of $1.29 billion, down from $2.04 billion as of September 30, 2024 [7]. - The company reported cash flow from operations of $130.3 million and free cash flow of $114.5 million for the fourth quarter [7].