Juniper (JNPR) Beats Q3 Earnings and Revenues; Shares Up

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Shares of Juniper Networks Inc.JNPR gained nearly 5% in yesterday's after-hours trading session in response to the better-than-expected third-quarter 2015 results.

Juniper's adjusted earnings per share (excluding one-time items but including stock-based compensation) of 48 cents came ahead of the Zacks Consensus Estimate of 43 cents and jumped more than twofold from the year-ago quarter figure of 22 cents.

On a GAAP basis, earnings came in at 51 cents as against 23 cents a year ago, mainly backed by higher revenues, stringent cost management and lower share count.

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Juniper's revenues of $1.248 billion surpassed the Zacks Consensus Estimate of $1.226 billion and came ahead of its own expectation of $1.230 billion. Further, revenues increased 10.9% on a year-over-year basis. The company stated that the better-than-expected top line was mainly driven by higher demand from Cloud and Cable service providers.

On a year-over-year basis, product revenues (74% of third-quarter revenues) went up 14.3%, while services revenues (26%) increased 2.1%.

The networking solutions provider witnessed revenue increase in all the product categories, except Security. Juniper's revenues from Routing products came in at $604.4 million, up 13.4% year over year, while revenues from Switching products grew 29.9% from the year-ago quarter to $201.4 million. However, Security products revenues declined 1.4% year over year to $119.6 million.

Geographically, the company registered improved business across every region. Revenues from the Americas, EMEA and Asia Pacific were up 5.1%, 22.2% and 15.1%, respectively, on a year-over-year basis.

Operating Results

Juniper's adjusted gross margin came in at 63.9% as against 63.5% a year ago, primarily because of favorable product and geography mix. Moreover, adjusted operating margin increased from 15.4% to 20.9% year over year on the back of stringent cost controls and improved gross margin.

The company reported adjusted net income (including stock-based compensation but excluding amortization, restructuring, goodwill impairment, acquisition-related and other expenses on a proportionate tax basis) of $186.8 million, up from $100.1 million reported last year.

Balance Sheet

Juniper exited the third quarter with total cash, cash equivalents and investments of $1.98 billion compared with $1.85 billion at the end of second quarter. Long-term debt was $1.65 billion.

During the first three quarters, the company generated cash flow of $775.5 million from operating activities compared with $478.5 million in the year-ago comparable period. Moreover, the company paid $118 million as dividend and repurchased $1.06 billion stocks in the first nine months of 2015. Additionally, Juniper declared a quarterly cash dividend of 10 cents per share, payable on Dec 22.


The company expects fourth-quarter revenues to be $1.290 billion (+/- 20 million), while the Zacks Consensus Estimate is pegged at $1.272 billion. Non-GAAP gross margin is expected to be around 64% (+/- 0.5%).

The company expects non-GAAP operating expenses to be $500 million (+/- $5 million), and non-GAAP operating margin to be 25%. Non-GAAP earnings per share are expected to range within 57 cents to 60 cents (mid-point 58.5 cents), much higher than the Zacks Consensus Estimate of 52 cents.

Our Take

Juniper posted better-than-expected third-quarter 2015 results and issued optimistic guidance for the fourth quarter. Moreover, the company anticipates solid demand for networking and is positive about the innovative product and service pipeline.

We are encouraged by Juniper's product launches, cost reduction initiatives and improving execution. The company's expansion into the software defined network segment should strengthen its position in the networking space.

However, charges related to the company's restructuring initiatives are likely to impact near-term profitability. Competition from Cisco CSCO and F5 Networks FFIV as well as delays in large projects remain the concerns.

Currently, Juniper sports a Zacks Rank #1 (Strong Buy). Another stock worth considering in the broader technology sector is Novatel Wireless Inc. MIFI with the same Zacks Rank as Juniper.

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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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