On January 1, 2013, Zacks Investment Research upgraded
Juniper Networks Inc.
) to a Zacks Rank #1 (Strong Buy).
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Why the Upgrade?
A decent third quarter 2012, rising estimates, planned cost
cutting, acquisition of Contrail, and higher spending announced
by its customer
) are the rank drivers for this stock.
Juniper acquired software-based networking startup Contrail
Systems for $176 million in cash in December 2012. Contrail
Systems primarily develops software to update and configure
networking equipment instead of manually adjusting networking
hardware. The acquisition is expected to help Juniper to stand
its ground against stiff competition from rivals like
Cisco Systems Inc.
Juniper posted adjusted earnings per share of 14 cents in the
third quarter of 2012, above the Zacks Consensus Estimate of 10
cents. Year-over-year revenue growth of 1.1% came on the back of
Switching and Services sales, contribution from Europe, as well
as Service Providers, which were partially offset by lower
Security solutions sales, weak contribution from Enterprises and
the Asia-Pacific region.
During the quarter, Juniper announced its plans to reduce 500
positions, which will save roughly $150.0 million in operating
We believe that with operating cost control and acquisition
synergies, Juniper will be able to outperform its peers.
For 2012, 9 out of 11 estimates were revised higher over the last
60 days. For 2013, 8 out of the 11 estimates moved upward.
Despite the positive estimate revisions, the Zacks Consensus
Estimate for 2012 remained unchanged at 48 cents in the last 60
days. However, the Zacks Consensus Estimate for 2013 went up by a
penny to 85 cents in the last 60 days.
Although the Zacks Consensus Estimate did not show much movement,
we believe that Juniper has the potential to post a positive
earnings surprise in the upcoming quarter. For the past four
quarters, Juniper has posted an average surprise of 21.1%.
Other Stocks to Consider
1. Cisco has a Zacks #2 Rank (Buy)
) has a Zacks #3 Rank (Hold).