A month has gone by since the last earnings report for Epam (EPAM Quick QuoteEPAM - Free Report) . Shares have added about 4.9% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Epam due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

EPAM Systems' Q1 Earnings & Revenues Beat Estimates

EPAM Systems’ first-quarter 2020 non-GAAP earnings per share improved 14.4% year over year to $1.43 and also beat the Zacks Consensus Estimate by 2.1%.

Additionally, revenues in the reported quarter came in at $651.4 million, reflecting a year-over-year rise of 24.9%. The top line also surpassed the Zacks Consensus Estimate of $649 million. On a constant currency (cc) basis, revenues were up 26%.

The company is benefiting from growth across all industry verticals and geographies. Digital transformation, focus on customer engagement and product development are key catalysts.

Quarterly Details

EPAM Systems’ largest vertical, Financial Services, displayed 16.2% growth on a year-over-year basis. Travel & Consumer improved 14.6%.

Software & Hi-Tech was up 21.9%. Business Information & Media climbed 46%.

Life Science & Healthcare rose 26.4%. Emerging Verticals improved 30.3%, driven primarily by clients in energy and telecommunications sectors.

Geographically, EPAM Systems generated 59.9% of total revenues from North America, up 23.1% year over year.

Revenues from Europe, contributing 34.2% to total revenues, were up 28.6%.

CIS or Commonwealth of Independent States, representing 3.8% of revenues, jumped 36.8%.

APAC was up 4.7%, accounting for 2.1% of revenues.

EPAM Systems’ non-GAAP operating income improved 18.1% year over year to $105.3 million, while operating margin contracted 90 basis points (bps) to 16.2%.

Balance Sheet and Cash Flow

EPAM Systems exited the first quarter with cash and cash equivalents of $916.3 million, up from $936.6 million witnessed at the end of the prior quarter.

As of Mar 31, 2020, long-term debt was $25 million, flat sequentially.

During the March-end quarter, the company generated operating cash flow of $63.3 million

Outlook

Citing the uncertainty regarding the coronavirus pandemic, which is impacting the global business and consumer activities, EPAM didn’t issue the full-year outlook.

Nonetheless, the company has issued its guidance for the second quarter.

For the ongoing quarter, the company forecasts revenues between $590 million and $605 million, suggesting year-over-year growth of 7.5%-10.2%. The company anticipates non-GAAP operating margins in the 14-16% range. Non-GAAP earnings per share are expected to be in the $1.12-$1.31 band.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

At this time, Epam has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision has been net zero. It's no surprise Epam has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.