Juniper Networks Earnings Preview: Hold on Headwinds? - Juniper Networks (NYSE:JNPR)

Technology and network infrastructure company Juniper Networks

JNPR

will announce its second quarter earnings on Tuesday, July 24, after market close. Juniper has previously issued guidance of $1.03 to $1.06 billion and diluted earnings per share (EPS) of $0.15 to $0.17. Analyst consensus for the quarter is $1.05 billion and EPS of $0.08, down from $0.14 three months ago.

The Company

Juniper Networks incorporated in 1996 and debuted on the public markets in 1999 with shares nearly tripling from its announced price range of $34. Juniper Networks was one of 457 IPOs in the year, with technology and internet-related companies making up the brunt of the releases. Of these companies, 117 doubled in price on the first day of trading, according to Investopedia. Shares of Juniper Networks hit all-time highs leading into the "Dotcom Crash" of spring 2000, and briefly hit $232 in October 2000 before a massive fall, starting 2001 around $109 and finishing 2001 trading around $20. Shares of Juniper Networks were down almost 50 percent over the past year and down around 23 percent year-to-date at Friday market close. The stock has a market cap of about $8.3 billion and has been trading in the $14 to $16 range during the past month. Juniper's 52-week trading range is $14.01 to $32.17. The stock could be seen as volatile with its recent trading levels, as well as with a beta of 1.74.

Recent News

Juniper Networks announced its acquisition of Mykonos Software in February 2012 for approximately $80 million in cash, and a stock repurchase authorization of up to $1 billion of common stock in June 2012. The company released new Mykonos security software in May. Juniper Networks reported first-quarter 2012 earnings with revenues of $1.03 billion, down 6 percent from the previous year, and diluted EPS of $0.16. Although the company has reported steady earnings in the past couple of years, year-over-year income results slid downward - by an average of 46.5 percent over the past four quarters, according to Narrative Science.

Analyst Commentary

Citi stated in a July 20 report that it expects "solid results and guidance" from Juniper Networks on its earnings announcement, additionally pointing to the company as its top tactical pick in the space.

"Juniper reports after the close on Tuesday, July 24th. We expect results to be largely inline with consensus and guidance, with potential for a more positive outlook. More importantly, we expect management to sound relatively constructive on carrier spending (particularly in N. America) and prospects for improvement in T4000 sales, which have shown little traction so far but should see improvement as carriers wrap up certification."

Citi expects Juniper results to be in line with previous guidance of $1.03 to $1.06 billion and EPS of $0.15 to $0.17. The ratings firm has a $22 price target and Buy rating on Juniper. Bank of America Merrill Lynch maintained its Juniper Networks Buy rating in a July 17 report, but reduced its fiscal-year 2012 and 2013 estimates. Bank of America has a $21 price target on Juniper.

"The consensus view on Juniper's fundamentals is negative, and the weak environment only adds concerns. However, over the last two years carriers have not invested much in core network capacity and we expect a favorable reversion that will benefit Juniper. Add on top new product cycles, new network topologies and progress in optical networks, and Juniper growth could accelerate in the next few quarters. In addition, the stock is trading near its 2008 lows on P/B and P/E and, and only at ~2x net cash, suggesting some weakness is already being reflected in the stock."

Morgan Stanley lowered its Juniper price target from $25 to $21 ahead of earnings in a July 16 research report, stating that, "Notwithstanding macro headwinds, we believe a product cycle/margin expansion story remains, and would revisit the story in late summer." Morgan Stanley has an Overweight rating on the company. Of the analyst firms with coverage on Juniper Networks, eight give the company a Buy or Strong Buy, while 20 maintain a Hold recommendation.

Market News and Data brought to you by Benzinga APIs