Juniper (JNPR) Up 9.6% Since Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Juniper Networks, Inc. JNPR. Shares have added about 9.6% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is JNPR 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 catalysts.

Juniper Surpasses Q1 Earnings & Revenue Estimates

Juniper Networks reported relatively healthy first-quarter 2018 results on the back of a solid performance from the cloud vertical and growth in enterprise business. Despite year-over-year decrease in earnings and revenues, the company was able to beat the respective estimates and remains confident of returning to a growth trajectory by the end of the year.

GAAP earnings decreased to $34.4 million or 10 cents per share from $108.8 million or 28 cents per share in the year-earlier quarter primarily due to lower revenues, which fell 11% year over year. Non-GAAP earnings for the reported quarter were $99.5 million or 28 cents per share compared with $178 million or 46 cents per share in the year-ago quarter owing to top-line woes. Non-GAAP earnings, however, beat the Zacks Consensus Estimate of 26 cents.

Top-Line Details

Net revenues for the quarter were $1,082.6 million compared with $1,221 million in the prior-year period. Product revenues (accounting for 65.7% of total revenues) decreased 14.2% on a year-over-year basis to $710.8 million on lower demand for routing and switching products, partially offset by positive momentum in security products.

Services revenues (34.3% of total revenues) were down 5.2% year over year to $371.8 million, largely due to the adoption of new accounting standards (ASC 606).

Geographically, revenues increased to $308 million from $284.5 million in EMEA (Europe, Middle East and Africa) due to higher number of projects associated with the cloud business and decreased 17.4% and 16.9% in the Americas and Asia Pacific, respectively, to $587.6 million and $187 million.

By verticals, revenues from Cloud and Service Provider businesses declined 19.1% and 15.6, respectively, to $268.3 million and $479.9 million due to architectural shifts in the former and seasonality issues and customer transition in the latter. Revenues from the Enterprise vertical were up to $334.4 million from $320.9 million in the year-ago quarter, due to strong financial services and healthy trends across all technologies.

Margins

Non-GAAP gross margin was 58.2% for the quarter while non-GAAP operating margin decreased to 12.3% from 20.8% due to lower revenues, customer and product mix and higher service costs, partially offset by improvements in the cost structure.

Balance Sheet & Cash Flow

Total cash, cash equivalents and investments as of Mar 31, 2018 were $3,448.4 million compared with $4,043.7 million in the year-ago period. Long-term debt at quarter end was $1,787.7 million. Net cash flow from operations was $271.1 million in the first three months of 2018 compared with $546.6 million in prior-year period.

During the quarter, the company initiated a new share repurchase program worth $750 million.

Outlook

Juniper anticipates recording sequential growth in the second quarter with margin improvement, driven by steady demand patterns, higher volumes and cost structure efficiencies. The company expects revenues of approximately $1,175 million (+/- $30 million) for second-quarter 2018. Non-GAAP gross margin is projected to be around 59% (+/- 1%). The company expects non-GAAP operating margin of 17.5%. Non-GAAP earnings are anticipated to be 44 cents per share (+/- 3 cents).

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been six revisions higher for the current quarter compared to two lower.

Juniper Networks, Inc. Price and Consensus

 

Juniper Networks, Inc. Price and Consensus | Juniper Networks, Inc. Quote

VGM Scores

At this time, JNPR has an average Growth Score of C, though it is lagging a lot on the momentum front with an F. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

Our style scores indicate that the stock is more suitable for value investors than growth investors.

Outlook

Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. Notably, JNPR has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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