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Why Did EPAM Systems (EPAM) Stock Soar 22% Last Month?

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EPAM Systems (EPAM - Free Report) stock has rallied 22.1% in August 2022 at a time when the U.S. stock market has been rattled by ongoing global macroeconomic and geopolitical uncertainties. The increased optimism came after the company surprised investors with its overwhelming second-quarter 2022 results in a market environment where several tech stocks delivered disappointing quarterly results.

EPAM Remains Resilient Amid Geopolitical Uncertainties

On Aug 4, EPAM reported second-quarter 2022 non-GAAP earnings of $2.38 per share, beating the Zacks Consensus Estimate of $1.71. The figure also improved by 16.1% year over year.

Revenues were $1.2 billion, reflecting a year-over-year increase of 35.6%. The top line surpassed the consensus mark of $1.14 billion. On a constant-currency basis, revenues were up 29.2%. Acquisitions completed in the last 12 months contributed 6.2% to the second-quarter top line.

Price Performance (August 2022)

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EPAM’s second-quarter performance reflects its resiliency amid massive business disruptions caused by the Russia-Ukraine war. In late February 2022, the company announced the discontinuation of its services in Russia in support of Ukraine.

EPAM had significant exposure in the region, with the majority of its delivery centers in the CEE. The company’s largest delivery centers were in Belarus, Russia and Ukraine. As of Dec 31, 2021, it had approximately 9,000 and 12,400 employees in Russia and Ukraine, respectively, making the company particularly vulnerable to the conflict.

However, following the Russia-Ukraine war, the company is trying to diversify its delivery locations by opening new sites across India, Latin America and Central and Western Asia. The second-quarter performance reflects how quickly the company has moved its delivery centers with minimal business disruptions.

What’s Ahead?

The Newton, PA-based company provides software engineering and IT consulting services. EPAM is benefiting from the ongoing digital transformation and a continued focus on improving customer engagement and product development.

The strong performance of Business Information & Media, the company’s largest industry vertical, is driving its top line. The company is benefiting from growth across all geographies and multiple industry verticals.

The latest forecast for worldwide IT spending by Gartner is an upside for EPAM. The worldwide IT spending is anticipated to increase 3% year over year to $4.5 trillion in 2022 and 6.1% to $4.81 trillion in 2023. The research firm expects the worldwide spending on IT services to grow 6.2% in 2022 and 8.3% in 2023.

Zacks Rank & Other Stocks to Consider

Currently, EPAM sports a Zacks Rank #1 (Strong Buy).

Some other similar-ranked stocks from the broader Computer and Technology sector are Clearfield (CLFD - Free Report) , Silicon Laboratories (SLAB - Free Report) and Taiwan Semiconductor (TSM - Free Report) . You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Clearfield's fourth-quarter fiscal 2022 earnings has been revised upward by 10 cents to 80 cents per share over the past 60 days. For fiscal 2022, earnings estimates have moved 36 cents north to $3.13 per share in the past 60 days.

Clearfield’s earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 33.9%. Shares of CLFD have soared 17.8% in August 2022.

The Zacks Consensus Estimate for Silicon Laboratories’ third-quarter 2022 earnings has increased 36.1% to $1.13 per share over the past 60 days. For 2022, earnings estimates have moved 20.5% up to $4.41 per share in the past 60 days.

Silicon Laboratories’ earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 63.6%. Shares of SLAB have decreased 15% last month.

The Zacks Consensus Estimate for Taiwan Semiconductor's third-quarter 2022 earnings has been revised a penny southward to $1.69 per share over the past 30 days. For 2022, earnings estimates have moved 37 cents north to $6.30 per share in the past 60 days.

TSM's earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 3.9%. Shares of the company have decreased 5.8% in August.

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