Juniper Networks Inc
) is scheduled to announce its third quarter 2012 results after
the closing bell on October 23, 2012. In the run up to the
earnings release, we notice minimal movement in analysts'
Second Quarter Recap
Juniper Networks' revenues declined 4.2% year over year, but
increased by 4.0% sequentially to $1.07 billion in the reported
quarter. The year-over-year decline was mainly attributed to the
weakness in the Service Provider segment in EMEA and APAC
regions. Whereas, the sequential increase was due to good
Enterprise and Service Provider growth in the Americas, which
offset weakness in other regions.
The company generated 74.9% of its consolidated quarterly
revenue from product sales, while the remaining 25.1% came from
service revenues. Both product revenues and service revenues
declined 9.7% and 17.4%, respectively, on a year-over-year
On a GAAP basis, Juniper Networks' gross margin was 63.6% in
the second quarter versus 67.2% in the year-ago quarter.
Favorable routing mix was somewhat offset by a higher mix of low
margin switching revenue and some cost increases in security.
Total cash, cash equivalents and investments in the reported
quarter were $3.04 billion compared with $3.43 billion in the
previous quarter. Juniper generated cash from operations of
$160.9 million in the quarter, down from $102.3 million in the
Third Quarter Guidance
For the third quarter of 2012, the company expects revenue in
the range of $1.04 billion to $1.07 billion. Non-GAAP gross
margin is expected to remain roughly flat sequentially. Moreover,
non-GAAP operating margin is projected to be in the range of 13%
to 14%. This is expected to generate non-GAAP net income per
share of between 15 cents and 18 cents on a diluted basis.
Agreement of Analysts
Out of the 11 analysts providing estimates for the third and
fourth quarters, none revised their estimates in the last 30
days. For fiscal 2012, only one out of twelve analysts raised the
estimate over the last 30 days, with no downward revision.
Moreover, out of 11 analysts providing estimates for fiscal 2013,
only 2 analysts raised estimates in the last 30 days.
Again some analysts believe that Juniper is a good play, to
gain from carrier capex recovery for patient investors, but
remain apprehensive regarding the near-term macroeconomic
uncertainty and relatively high European exposure. IT
infrastructure spending remains at a low level and recent
developments indicate more uncertainty about a capex recovery in
the second half.
Some analysts are of the opinion that the company is on track
of reducing its operating expense by a total amount of $150MM
during the current year 2013. The analysts are also of the
opinion that Juniper has to show considerable evidence that it is
living up to the promise and will be delivering a mid single
digit growth during the calendar year 2013 and beyond in order to
grow from current levels.
In this environment, some analysts are concerned about
Juniper's go-to-market strategy and its product execution. This
apart, Juniper's excessive spending on its wireline business may
create problems for the company going forward as the growth
opportunity in this segment is not very high. The company is also
having a tough time in the service-provider router market.
Moreover, some analysts doubt management capability as the
company is failing to innovate and launch new products and
solutions to attract customers.
Magnitude of Estimate Revisions
While there are no changes in the Zacks Consensus Estimate for
the third quarter in the last 30 days, we do see estimates moving
down by 3 cents over a period of 90 days to 10 cents. For the
December quarter, estimates have remained unchanged over the last
30 days, while moving down 5 cents over the last 90 days to 16
cents. Over the last 90 days, the Zacks Consensus Estimate for
fiscal 2012 has moved down by 5 cents to 44 cents, while it
remained unchanged over the last 30 days.
Juniper delivered modest second quarter 2012 numbers, but
witnessed a decline in revenue on a year-over-year basis.
However, EPS exceeded the Zacks Consensus Estimate. Although the
company delivered a decent EPS, the operating performance of the
company was mediocre as costs increased substantially over the
On a positive note, Juniper's revenue in the Americas
increased sequentially. Therefore, the fact that international
opportunities are unfolding is a big positive in this
On the negative side, Enterprise Networking may witness less
business going forward. Stiff competition from industry stalwarts
Cisco Systems Inc.
) is also a headwind for the stock.
CISCO SYSTEMS (CSCO): Free Stock Analysis
HEWLETT PACKARD (HPQ): Free Stock Analysis
JUNIPER NETWRKS (JNPR): Free Stock Analysis
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