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Can Juniper (JNPR) Keep Earnings Beat Streak Alive in Q1?

Zacks Equity Research

Juniper Networks, Inc. JNPR is scheduled to report first-quarter 2019 financial results on Apr 25, after the closing bell. In the last reported quarter, the company delivered a positive earnings surprise of 3.5%. Juniper surpassed the Zacks Consensus Estimate in each of the last four quarters, the average beat being 11.4%.

The computer network equipment maker’s top line was stifled by volatile demand and intense market competition in the to-be-reported quarter. In addition, the partial U.S. federal government shutdown and geopolitical uncertainty have adversely impacted its business. Let’s find out how things are shaping up prior to the announcement.

What Our Model Says

Our proven model shows that Juniper is likely to beat earnings this quarter as it has the two key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is exactly the case here as you will see below:

Earnings ESP: Juniper’s Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +10.00% as the former is pegged at 23 cents and the latter at 21 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Juniper Networks, Inc. Price and EPS Surprise

Juniper Networks, Inc. Price and EPS Surprise | Juniper Networks, Inc. Quote

Zacks Rank: Juniper currently carries a Zacks Rank #2. This increases the predictive power of ESP.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Factors at Play

During the first quarter, Juniper’s high-performing solutions were selected by BroadBand Tower — one of Japan’s largest data center providers — to power the latter’s 5G data center in the central Tokyo district of Otemachi. The move, which contributes significantly to the future of Japan’s businesses as they advance into the 5G era, is expected to aid Juniper’s top line performance.

Furthermore, the company enhanced its metro, edge and core solutions to facilitate service providers’ seamless transition to 5G networks. Offerings, which comprise IP optimized silicon enabling 400GbE density on a new 14.4Tb line card, new ACX access, and improved MX 5G router portfolio, are likely to support operators in transforming their infrastructure in a cost-efficient manner.

Top-Line Contraction

Despite the positives, unfavorable global macro environment and weak investment patterns among customers are likely to have dampened Juniper’s revenue growth. Ongoing consolidation in the telecom industry have also put considerable pressure on the company’s financials. Its Cloud revenues are expected to decline to $208 million from $268 million reported in the year-ago quarter, due to slower-than-expected pace of deployments among its hyperscale customers.

For the first quarter, net revenues from Routing are projected to decrease to $350 million from $408 million, reported a year ago. Net revenues from Switching are expected to fall to $204 million from $230 million, while the same from Security is likely to improve to $77 million from $73 million.

The Zacks Consensus Estimate for revenues from the Product segment (comprising Routing, Switching and Security products), which accounts for the lion’s share of total revenues, is pegged at $609 million. The company reported $711 million in first-quarter 2018. Revenues from the Service segment are anticipated to increase to $374 million from $372 million.

Consequently, total revenues for the quarter are estimated to fall to $987 million from $1,083 million, reported in the year-earlier quarter. Adjusted earnings per share are pegged at 21 cents. The company reported earnings of 28 cents a year ago.

Other Stocks to Consider

Here are some other companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Molina Healthcare, Inc. MOH with an Earnings ESP of +3.49% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

PotlatchDeltic Corp. PCH with an Earnings ESP of +9.09% and a Zacks Rank #2.  

ConocoPhillips COP with an Earnings ESP of +1.55% and a Zacks Rank #2.  

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