Juniper Networks Inc
) is scheduled to announce its second quarter 2012 results on July
24, 2012, after the closing bell. We notice minimal movement in the
analysts' estimates at this point.
First Quarter Recap
Juniper Networks' revenues declined 6.27% year over year to
$1.03 billion in the first quarter. The company generated 74.8% of
its consolidated quarterly revenue from product sales, while the
remaining 25.2% came from services. Product revenues plunged 12.0%,
whereas services revenue increased 16.3% on a year-over-year
was up 2.0% sequentially but declined 8.6% year over year. The
sequential growth was fueled by large orders from U.S. service
providers, while the annual decline was mainly due to lower
business from regional and content service providers, offset to a
considerable extent by good Enterprise growth.
was up 2.4% year over year, but down 23% sequentially. The
sequential decline was the result of high base effect, as the
company witnessed record fourth quarter revenue.
decreased 11.8% year over year. In the Asia Pacific region, Japan
exhibited sequential growth as a result of better performance from
the Service Provider.
On a GAAP basis, Juniper Networks' gross margin was 61.4% in the
quarter versus 66.8% in the year-ago quarter. The company's product
gross margin continues to be negatively impacted by the product and
geographic mix. This apart, gross margin was also impacted by
inventory-related costs. Operating margin on a GAAP basis was 4.6%
versus 16.1% in the year-ago quarter.
Total cash, cash equivalents and investments in the first
quarter of 2012 were $3.43 billion compared with $3.55 billion in
the fourth quarter of 2011. Juniper generated cash from operations
of $102.3 million in the quarter, down from $239.6 million in the
The company expects second quarter revenue in the range of
$1,030.0 million to $1,060.0 million. Non-GAAP gross margin and
non-GAAP operating expenses are expected to remain in line with
first quarter levels.
Non-GAAP operating margin for the second quarter is expected in
the range of 12.0% to 14.0%. Moreover, non-GAAP net income per
share will range between 15 cents and 17 cents on a diluted
Agreement of Analysts
Out of the 11 analysts providing estimates for the second
quarter, none revised their estimates in the last 30 days. Again
for fiscal 2012, one analyst revised the estimate downward over the
last 30 days, while none moved in the opposite direction.
Some analysts continue to see Juniper as a good play on a
carrier capex recovery for patient investors, but remain
apprehensive regarding the near-term macro uncertainty, and
relatively high European exposure. IT infrastructure spending
remains at a low level and recent developments indicate more
uncertainty about a 2H capex recovery. Despite this, we continue to
believe that Juniper is well positioned for growth, with new
products presenting solid upside potential.
Moreover, analysts are also of the opinion that Juniper's
security business is expected to take some time to shift from
ScreenOS to JUNOS, and additional feature sets have not been
completely transformed to Junos. The analysts also believe that
this transition will likely continue until year-end 2012.
Magnitude of Estimate Revisions
While there are no changes in the Zacks consensus over the last
30 days, we do see some change since the company last announced
earnings. Over the last 90 days, the Zacks Consensus Estimate for
the second quarter has moved down by 5 cents to 8.
For fiscal year 2012, estimates moved down by 16 cents to 49
cents over the same period. Again, the estimate for fiscal year
2013 has moved down by 15 cents to 81 cents.
Juniper delivered modest first quarter 2012 numbers, but
witnessed a decline in revenue on a year-over-year basis.
Additionally, the core routing segment in the U.S. is becoming
increasingly competitive due to lower-cost solutions in the market.
So this is the right time for the company to generate a
fast-growing adjacent segment. The fact that international
opportunities are also unfolding is a big positive.
Moreover, Enterprise Networking may also act as a dampener for
the company. Stiff competition from industry stalwarts like
Cisco Systems Inc.
) is also a headwind for the stock.
Juniper has a Zacks #3 Rank, implying a short-term Hold
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