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EPAM Raises Q1 View, Withdraws 2020 Outlook Amid Coronavirus

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EPAM Systems, Inc. (EPAM - Free Report) recently provided key updates on its outlook for the first quarter as well as 2020. The company raised its view for the first quarter of 2020. However, anticipating an uncertainty regarding the potential impacts of the coronavirus pandemic on its second-quarter and full-year results, EPAM withdrew its 2020 guidance.   

The global provider of digital platform engineering and software development services now expects first-quarter 2020 revenues between $649 million and $653 million, with a 24.5% (as reported and at cc) year over year revenue increase.

Additionally, EPAM expects first-quarter profitability to be equal to or better than the outlook provided during the fourth quarter and 2019 earnings conference call on Feb 20.

Notably, during the conference call, the company had forecasted first-quarter revenues of a minimum of $642 million, up 23% (as reported and at cc) year over year. Non-GAAP earnings per share were expected to be at least $1.36. Meanwhile, non-GAAP operating margin was projected between 15% and 16%.

However, the company withdrew its 2020 guidance, citing the uncertainty regarding the coronavirus pandemic, which is impacting the global business and consumer activities.

During its fourth-quarter earnings conference call, EPAM had mentioned that it expects 2020 revenues to exceed 22% year over year. Non-GAAP operating margin was projected in a band of 16-17%. The company also anticipated non-GAAP earnings to be $6.30 per share.

The Zacks Consensus Estimate for EPAM’s 2020 revenues is currently pegged at $2.75 billion, indicating growth of 19.98% from the prior year.

Management noted that although, in recent weeks, the company has taken various measures to ensure its employees’ safety, including moving more than 98% of employees to a work-from-home environment, it expects its business operations to remain affected throughout the year.

Uncertainty Looms Large

The rapid spread of the coronavirus globally has created a bubble of uncertainty, which is affecting several small and large companies.

For instance, Yelp (YELP - Free Report) recently withdrew its first quarter and 2020 financial guidance due to the impact of the pandemic on its business. Also, Sabre Corp. (SABR - Free Report) was recently reported to be temporarily cutting salaries and stopping 401(k) contributions for its employees as a result of the challenges faced by the travel industry due to the coronavirus.

Further, in February, Apple (AAPL - Free Report) issued an investor update stating that it does not anticipate meeting the revenue guidance provided on Jan 28, 2020, for second-quarter fiscal 2020. The company also stated that “worldwide iPhone supply will be temporarily constrained” due to the impact of the outbreak.

Apple’s discouraging view is also expected to weigh on Cirrus Logic’s fourth-quarter fiscal 2020 revenues. The company generates a major part of revenues by selling audio amplifier chips utilized in iPhone devices. Notably, Apple, its largest client, accounted for 83% of Cirrus Logic’s sales in the fiscal third quarter.

It remains to be seen what further implications the coronavirus crisis adds to the global economy.

EPAM currently carries a Zacks Rank #3 (Hold).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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