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Can Juniper (JNPR) Beat Q2 Earnings Despite Top-Line Woes?

Juniper Networks, Inc.JNPR is scheduled to report second-quarter 2018 financial results after the closing bell on Jul 26. The company is unlikely to report higher revenues in either of the operating segments due to volatile demand and stiff market competition.

Whether this will impair its bottom-line growth for the quarter remains to be seen.

Top-Line Contraction

Unfavorable global macro environment and weak investment patterns among customers are likely to hurt Juniper's revenue growth. Ongoing consolidation in the telecom market is also expected to weigh on the company's financials. Moreover, Cloud revenues, which are expected to be $299 million in the to-be-reported quarter, is posing challenges for the company as it passes through a transition phase.

For the second quarter, net revenues from Routing are expected to decrease to $458 million from $573 million reported in the year-ago quarter. Net revenues from Switching might come down to $253 million from $276 million, although that from Security is likely to improve to $75 million from $69 million.

The Zacks Consensus Estimate for revenues from the Product segment (comprising Routing, Security and Switching products), which accounts for the lion's share of total revenues, is currently pegged at $786 million, down from $917 million reported in second-quarter 2017.

Revenues from the Service segment are expected to be $390 million compared with $392 million in the prior-year quarter. Consequently, total revenues for the quarter are likely to decline to $1,173 million from $1,309 million reported in the year-earlier quarter.

Other Factors

Despite the top-line woes, non-GAAP gross margin is expected to improve sequentially due to increased volume and improvements in cost structure. Juniper expects to achieve this through value engineering efforts, supply chain optimization, pricing management and increasing software and solution sales.

Juniper is expanding its five-step multi-cloud migration framework to include evolution paths for campus and branch networks. The migration provides enterprises with a set of best practices and natural technology insertions for easier completion of the journey to a secure and automated multi-cloud.

Juniper also introduced an expanded portfolio of offerings to bring businesses closer to a secure and automated multicloud environment. It aims to provide the infrastructure solutions that organizations need to become multicloud-ready by adding to its robust portfolio of data center, campus, branch and cloud networking solutions.

The company augmented its unified cybersecurity platform with improved features to thwart data theft and other cyber-crimes. The strategic endeavor is aimed at empowering customers to run their business enterprises with increased confidence at higher efficiency level. Such technological collaborations and new product launches are likely to augment its market position and generate incremental revenues in the future.

Our proven model shows that Juniper is likely to beat earnings this quarter as it possesses the key components to trump estimates. 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 perfectly the case here as you will see below:

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +1.34% as the former is pegged at 44 cents and the latter at 43 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 has a Zacks Rank #3. This increases the predictive power of ESP and makes us reasonably confident of an earnings beat.

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.

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:

Motorola Solutions, Inc. MSI is slated to release quarterly numbers on Aug 2. It has an Earnings ESP of +1.46% and a Zacks Rank #2.You can see the complete list of today's Zacks #1 Rank stocks here .

Windstream Holdings, Inc. WIN , with an Earnings ESP of +12.15% and a Zacks Rank #2, is slated to report results on Aug 9.

Cisco Systems, Inc. CSCO has an Earnings ESP of +0.85% and a Zacks Rank #2. The company is scheduled to release earnings on Aug 15.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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