Scotiabank analyst Divya Goyal maintains a Hold rating on software firm EPAM Systems, Inc (NYSE:EPAM) with a price target of $245.

EPAM delivered third-quarter 2024 results that surpassed internal and consensus forecasts, outperforming the company's prior guidance. Revenue reached $1.168 billion, slightly up by 1.3% year-over-year, exceeding the upper limit of its projected range.

The company also benefited from $52 million in R&D incentives from the Polish government, with $23 million related to fiscal 2023 and $29 million year-to-date for 2024.

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EPAM's operating income increased by 55.2% year-over-year, reaching $177 million with an operating margin of 15.2%, driven primarily by R&D tax incentives. Adjusted operating income stood at $222.9 million, reflecting a 14% year-over-year growth and exceeding expectations by around 18%. The company's adjusted operating margin came in at 19.1%, surpassing its initial guidance of 16.0%-17.0%.

EPAM reported EPS of $2.37, a 43.7% increase from the previous year, significantly beating analyst estimates. Adjusted EPS was $3.12, up 14.2% year-over-year, surpassing expectations by over 16%. Cash flow from operations in the third quarter amounted to $241.9 million, up from $214.9 million in the third quarter of 2023. The company's cash reserves totaled $2.04 billion, with a headcount of approximately 53,250, including 47,750 delivery professionals.

EPAM revised its guidance for the fourth quarter of 2024, forecasting revenue of $1.205 billion—$1.215 billion, reflecting a 5% beat at the midpoint against consensus estimates. The outlook incorporates a 5.7% contribution from acquisitions, mainly driven by the NEORIS deal. For 2024, EPAM raised its revenue target to $4.685 billion—$4.695 billion, reflecting a 1.8% increase from previous guidance, accounting for the recent NEORIS acquisition.

Despite challenging market conditions, EPAM's strategic acquisitions and diversified geographic presence have fortified its business, supporting strong execution. The company expects steady growth as client budgets for digital transformation projects recover, aided by its expanding service capabilities from acquisitions like NEORIS and First Derivative.

Price Action: EPAM stock is up 0.91% to $235.00 at last check Friday.

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