Juniper Q1 Earnings Down Y/Y, Revs Up - Analyst Blog

Juniper Networks Inc. JNPR reported adjusted earnings per share (including stock-based compensation but excluding amortization, restructuring, acquisition-related and other expenses) on a proportionate tax basis of 16 cents in the first quarter of 2014, which lagged the Zacks Consensus Estimate of 19 cents.

Revenues

Juniper's revenues not only increased 10.5% from the year-ago quarter to $1.17 billion, but also came ahead of the Zacks Consensus Estimate of $1.15 billion. Total revenue was positively impacted by higher product revenues (up 12.1% year over year) and services revenues (up 6% year over year).  

Juniper's revenues from Routing products came in at $549.8 million, up 7.1% year over year, primarily attributable to the solid performance of the new MX2000 series and MX104 products.

Buoyed by the robust demand for EX and QFabric product series, Juniper's revenues from Switching products jumped 46.3% year over year to $192.0 million. However, revenues from Security products were down 1.8% from the year-ago quarter to $134.2 million due to decline in ScreenOS products.   

Geographically, revenues from the Americas, EMEA and Asia Pacific were up 15.1%, 1.8% and 9.3%, respectively, on a year-over-year basis.

Operating Results

Juniper Networks' gross margin was 61.5% in the first quarter versus 63.3% in the year-ago period, primarily due to unfavorable product mix. Adjusted operating margin improved from 10.6% to 11.4% year over year due to lower operating expenses as a percentage of revenues. Operating expenses decreased from 54.5% to 52.3% as a percentage of revenues. During the quarter, the company incurred restructuring charges of $122.4 million.

The company reported adjusted net income (including stock-based compensation but excluding amortization, restructuring, acquisition-related and other expenses on proportionate tax basis) of $78.6 million or 16 cents, which decreased from $100.5 million or 20 cents reported in the year-ago quarter.

Balance Sheet

Juniper exited the quarter with total cash, cash equivalents and investments of $2.96 billion compared with $2.84 billion in the previous quarter. Long-term debt was $1.35 billion, up from $999.3 million in the previous quarter.

Guidance

Juniper expects second-quarter revenues in the range of $1.20 to $1.23 billion. The Zacks Consensus Estimate of $1.21 billion falls within this range. Non-GAAP gross margin is expected around 64.0% (+/- 0.5%).

The company expects non-GAAP operating expenses to be $520 million (+/- $5 million), down from the previous quarter, whereas non-GAAP operating margin will likely be 21.0% (+/- 0.5%). Non-GAAP earnings per share are expected to range between 36 cents and 39 cents, well above the Zacks Consensus Estimate of 26 cents.

Our Take

Juniper delivered mixed first-quarter results wherein the top line exceeded the Zack Consensus Estimate but the bottom line lagged the same. The company provided modest second-quarter guidance.

We remain encouraged by the company's product launches, cost reduction initiatives and improving execution are positives. Increased spending by service providers such as AT&T T and Verizon VZ should also support the company's near-term fundamentals. Juniper's expansion into the software defined network segment is expected to strengthen its position in the networking space.

However, charges related to the company's restructuring initiatives are expected to impact near-term profitability. Competition from Cisco CSCO and F5 Networks also remain a concern.

Currently, Juniper carries a Zacks Rank #2 (Buy).