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Juniper (JNPR) Up 9.3% Since Last Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Juniper Networks (JNPR). Shares have added about 9.3% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Juniper Beats Earnings & Revenue Estimates in Q2

Juniper reported healthy second-quarter 2021 results, wherein both the bottom line and the top line beat the Zacks Consensus Estimate.

Investments in customer solutions and sales organization have enabled the company to capitalize on improving end-market conditions.

Of the top 10 customers in the quarter, four were Cloud, five were Service Provider and one was an Enterprise. The top 10 customers accounted for 33% of total revenues compared with 30% a year ago.

Net Income

On a GAAP basis, net income in the June quarter was $62 million or 19 cents per share compared with $61.2 million or 18 cents per share in the prior-year quarter.

Non-GAAP net income was $141 million or 43 cents per share (above the mid-point of the company’s guidance) compared with $116.3 million or 35 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 4 cents.

Revenues

Quarterly total revenues increased to $1,172.3 million (above the mid-point of the company’s guidance) from $1,086.3 million in the prior-year quarter, driven by growth across all verticals and regions. Juniper experienced record product orders during the quarter, which helped it grow backlog. The top line surpassed the consensus estimate of $1,145 million.

Product revenues (contributing 64.8% to total revenues) improved 9.7% year over year to $759.2 million. Service revenues (contributing 35.2% to total revenues) increased 4.8% to $413.1 million led by strong renewals and service attach rates.

By vertical, revenues in Cloud increased to $320.6 million from $285.5 million, which reflects solid momentum. Revenues in Service Provider increased to $443.7 million from $436.2 million in the year-ago quarter, indicating improved trends with some of the large strategic customers. Revenues in Enterprise improved to $408 million from $364.6 million, driven by strong momentum with new logos and an increased number of deals.

By region, revenues improved to $323.9 million from $294.1 million in the year-ago quarter in Europe, Middle East and Africa. Revenues in the Americas increased to $652.7 million from $608.8 million. In the Asia Pacific, revenues were up 6.7% to $195.7 million.

Other Details

Gross profit was $681.9 million compared with $619.6 million in the year-ago quarter. Total operating expenses increased to $596.2 million from $529.1 million. Operating income was $85.7 million compared with $90.5 million a year ago. Non-GAAP operating income was $184.8 million, up from $155.2 million, with respective margins of 15.8% and 14.3%.

Cash Flow & Liquidity

During the first half of 2021, Juniper generated $437 million of net cash from operations compared with $369.8 million in the prior-year period. As of Jun 30, 2021, the company had $986.7 million in cash and cash equivalents with $1,694.4 million of long-term debt.

Outlook

Due to the worldwide shortage of semiconductors, Juniper is experiencing component shortage, which is resulting in extended lead times of certain products and elevated costs. The company continues to strengthen its supply chain to enhance its resiliency and limit disruptions. Juniper is witnessing strong momentum across its core industry verticals and is confident of its long-term prospects.

For the third quarter, it expects revenues of $1,200 million (+/- $50 million). Non-GAAP gross margin is anticipated to be 59.5% (+/- 1%). Non-GAAP operating expenses are expected to be $520 million (+/- $5 million). The company estimates non-GAAP operating margin to be about 16.2% at the mid-point of the revenue guidance. Non-GAAP net income is expected to be 46 cents per share (+/- 5 cents), assuming a share count of almost 330 million.

How Have Estimates Been Moving Since Then?

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

VGM Scores

At this time, Juniper has a subpar Growth Score of D, a grade with the same score on the momentum front. 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 C. 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. It comes with little surprise Juniper has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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