Tuesday, April 19, 2011

Juniper Networks, Inc. (NYSE: JNPR): Q1 Earnings Preview 2011

Juniper Networks, Inc. (NYSE: JNPR), the second- largest maker of computer-networking equipment, is scheduled to release its first-quarter financial results after the closing bell on Tuesday, April 19, 2011. Analysts, on average, expect the company to report earnings of 32 cents per share on revenue of $1.10 billion. In the year ago quarter, the company reported earnings of 27 cents per share on revenue of $912.62 million.

Juniper Networks, Inc. designs, develops, and sells products and services that provide network infrastructure used for the deployment of services and applications over a single Internet Protocol (IP) based network worldwide.

In the preceding fourth quarter, the Sunnyvale, California-based company's net income was $190.2 million or $0.35 per share, compared to $22.9 million or $0.04 per share for the year-ago quarter. On an adjusted basis, the company earned 42 cents a share in the latest quarter. Revenue climbed 26% to $1.19 billion from $941.45 million in the same last year. Analysts, on average, expected the company to report earnings of 37 cents per share on revenue of $1.12 billion.

At its last earnings call in January, the company said that it expects first quarter revenue of $1.06 billion to $1.11 billion and adjusted earnings of $0.30 and $0.33 per share.  The company also said that it expects customer demand to remain healthy going forward, which would subsequently drive further gains in the networking and cloud computing space. Juniper also said that it is on track to deliveri its long-term model of 20% or higher revenue growth and 25% or higher operating margin. Gross margins for the first quarter are expected to range between 66% and 68%. 

The company's carrier business has benefited from the increase in demand for its MX 3D routers, which has the potential to generate more business given some old business that it has recaptured. Continuous launch of new products and entry into new markets will keep Juniper ahead of its networking peers. Juniper will likely release several switches and routers to support its initiative in 2011 and challenge market leaders like Cisco (NASDAQ: CSCO). Increased spending by key carriers such as AT&T Inc. (NYSE: T) and Verizon Inc. (NYSE: VZ), as well as ongoing enterprise share gains, fueled by the EX switch and SRX security platforms, will pave the way for healthy profitability, going forward. Juniper is pushing further into the mobile internet market, which will likely be one of the important growth drivers going forward if current trends continue.

In the mobile Internet, Juniper is acquiring companies to fill out its portfolio in several areas of this market. The company recently launched its TCA Series Timing Appliance portfolio which has applications for mobile networks. Moreover, the company is leveraging targeted M&A to accelerate its strategy in mobile Internet and cloud computing.

However,  Juniper's first-quarter earnings could be impacted by the recent earthquake and tsunami in Japan. Leading Japanese phone maker NTT Docomo is a big customer of the networking-equipment maker.  Typically, sales in Japan have the highest margin.

The company's stock currently trades at a forward P/E (fye Dec 31, 2012) of 20.07 and PEG ratio (5 yr expected) of 1.31.  In terms of stock performance, Juniper shares have lost nearly 9 percent over the past year.

Full Disclosure: None.
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