JP Morgan Previews Aruba Networks Q2 Results

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JP Morgan previewed earnings for Aruba Networks, Inc. ARUN Wednesday and maintained a Neutral rating.

The company reports fiscal Q2 results after the market close on Thursday and the Street expected revenue of $210.22 million with EPS of $0.27.

JP Morgan analyst Rod Hall expected Q2 revenue to come in at $210.0 million and for EPS be in line with consensus at $0.27.

Q2 gross margin was estimated at 72 percent, while EBIT margin was expected to be 21.5 percent.

For Q3, Hall forecasted revenue of $210.7 million versus consensus of $215.6 million. Hall's EPS estimate was in line with consensus at $0.27.

Q3 gross margin was forecasted at 72.0 percent with EBIT margin of 21.4 percent.

Hall added that the firm was "cautious on fundamentals heading into Aruba's FQ2 report driven by the Cisco Systems miss as well as FX concerns." The analyst expected, however, that much of the focus would be on reports that Hewlett-Packard Company HPQ may acquire the company.

Discussing Cisco, Hall noted that the company missed the firm's estimates by 8.7 percent, however, the analyst saw "Cisco as a potential threat in the WiFi market should it choose to be more aggressive."

Regarding FX concerns, "the dollar strength could cause demand weakness," according to Hall, however, it "may also boost margins given that international expenses are denominated in local currencies."

Lastly, the analyst note cited FCC approvals to increase spending to $3.9 billion annually "to wire schools and libraries with high-speed internet connections," which may act as a tailwind according to Hall.

Heading into its earnings report, Aruba Networks traded at $22, down 1.1 percent.

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Posted In: Analyst ColorAnalyst RatingsJP MorganRod Hall
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