Juniper (JNPR) Up 5.2% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Juniper Networks (JNPR). Shares have added about 5.2% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Juniper due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Juniper Q1 Earnings Beat Estimates on Top-Line Growth
Juniper reported healthy first-quarter 2021 results wherein both the top line and the bottom line surpassed the Zacks Consensus Estimate. The company witnessed solid order trends across all customer verticals driven by strength in the product portfolio. With strong near-term visibility, the company expects to record decent year-over-year growth in business in 2021.
Of the top 10 customers, five were Cloud, four were Service Provider and one was an Enterprise. Notably, the top 10 customers contributed 31% to net revenues in the first quarter of 2021 compared with 33% in the prior-year quarter.
Net Income
On a GAAP basis, net loss in the March quarter was $31.1 million or loss of 10 cents per share against net income of $20.4 million or 6 cents per share in the prior-year quarter. Despite top-line growth, the drastic year-over-year deterioration was primarily due to loss on extinguishment of debt and higher operating costs.
Quarterly non-GAAP net income was $98.5 million or 30 cents per share (above the mid-point of the company’s guidance) compared with $77.2 million or 23 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 5 cents.
Revenues
Quarterly total revenues aggregated $1,074.4 million (above the mid-point of the management-provided guidance) compared with $998 million reported in the year-ago quarter. The year-over-year growth, despite coronavirus-led adversities leading to supply constraints and extended lead times, was largely driven by healthy momentum across all verticals. Notably, Juniper experienced strong orders in the Cloud and Enterprise verticals with 30% and 20% rise, respectively, on a year-over-year basis. The top line beat the consensus mark of $1,058 million.
Product revenues (comprising Routing, Switching and Security and contributing 62.6% to net revenues) in the quarter improved 10.4% year over year to $672.4 million. Despite healthy momentum in Routing and Security products with better-than-expected orders driven by strength in high-end markets, Switching business was relatively down. Service revenues (contributing 37.4% to net revenues) increased 3.3% to $402 million due to strong renewals.
By vertical, revenues in Cloud increased to $270.7 million from $261.9 million, primarily driven by strength in Routing and Security businesses. However, it was partially offset by softness in Switching. Revenues in Service Provider increased to $438.2 million from $375.5 million in the year-ago quarter due to robust growth in 400-gig systems and investments in automation technologies. Revenues in Enterprise improved to $365.5 million from $360.6 million, bolstered by higher Routing revenues.
Region wise, revenues improved to $311.1 million from $255 million in the year-ago quarter in Europe, the Middle East, and Africa. Quarterly revenues in the Americas increased marginally to $583 million from $579.5 million. In the Asia-Pacific, net revenues were up 10.3% to $180.3 million.
Other Details
Overall, gross profit came in at $615.6 million compared with $579.3 million in the year-ago quarter. Total operating expenses increased to $587.8 million from $539.9 million due to higher restructuring charges, research and development costs and sales and marketing expenses. Operating income was $27.8 million compared with $39.4 million in the year-ago quarter. Non-GAAP operating income was $130.1 million, up from $101.8 million, with a margin of 12.1% and 10.2%, respectively.
Cash Flow & Liquidity
In the first three months of 2021, Juniper generated $179.8 million of net cash from operations compared with $272.2 million in the prior-year period. As of Mar 31, 2021, the computer network equipment maker had $989.1 million in cash and equivalents with $1,685.2 million of long-term debt.
Guidance
Juniper provided guidance for the second quarter of 2021. It expects revenues of $1,140 million (+/- $50 million), up 5% year over year at the mid-point of the guidance. Non-GAAP gross margin is anticipated to be 59.5% (+/- 1%). Non-GAAP operating expenses are expected to be $512 million (+/- $5 million). The company estimates non-GAAP operating margin to be nearly 14.6% at the midpoint of revenue guidance. Non-GAAP net income is expected to be 38 cents per share (+/- 5 cents), assuming a share count of about 330 million.
For 2021, Juniper expects revenue increase of 4-5%, driven by solid growth in the Enterprise vertical, followed by Cloud and Service Provider verticals. Markedly, the sequential revenue and earnings growth expectation is primarily driven by strong order backlog and healthy momentum across the core industry verticals despite the ongoing COVID-19 challenges. This, in turn, is likely to reinforce Juniper’s go-to-market organization and technology portfolio, while driving profitability in the long run.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
VGM Scores
At this time, Juniper has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. Notably, Juniper has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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