What's In Store For Juniper (JNPR) This Earnings Season?

Juniper Networks, Inc. (NYSE:JNPR) is set to report third-quarter 2016 results on Oct 25, after the market closes. Last quarter, the company posted a positive earnings surprise of 5.41%. Over the past four quarters, the company has posted an average positive earnings surprise of 2.34%.

Let’s see how things are shaping up for this announcement.

Factors at Play

Juniper delivered decent second-quarter results. Though it surpassed the Zacks Consensus Estimate on both counts, the metrics declined on a year-over-year basis.

Ahead of its third quarter results, we are optimistic about the company’s product launches, its cost reduction initiatives and improving execution. Also, the company’s expansion into the software defined network segment should strengthen its position in the networking space.

However, an uncertain global macro environment and potentially weak investment patterns among customers are the major headwinds. Competition from Cisco Systems, Inc. (NASDAQ:CSCO) and F5 Networks (NASDAQ:FFIV) as well as delays in large projects are the other concerns.

Juniper’s outlook for the third quarter is encouraging. The company expects third-quarter revenues of approximately $1.250 billion (+/- $30 million), which is in line with the Zacks Consensus Estimate of $1.25 billion.

Non-GAAP gross margin is projected to be around 63% (+/- 0.5%). The company expects non-GAAP operating expenses of $500 million (+/- $5 million), and non-GAAP operating margin of 23%.

Non-GAAP earnings per share are expected to range within 48 cents to 54 cents (mid-point 51 cents), much higher than the Zacks Consensus Estimate of 41 cents.

Earnings Whispers

Our proven model does not conclusively show that Juniper will beat earnings this quarter. This is because 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. That is not the case here as you will see below.

Zacks ESP: Both the Most Accurate Estimate and the Zacks Consensus Estimate stand at 41 cents. Hence, the difference is 0.00%.

Zacks Rank: Juniper has a Zacks Rank #3. Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Stock to Consider

You could consider the following stock with a positive Earnings ESP and a favorable Zacks Rank:

Inovalon Holdings, Inc. (NASDAQ:INOV) , with an Earnings ESP of +50.00% and Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

SITO Mobile, Ltd. (NASDAQ:SITO) , with an Earnings ESP of +100.00% and Zacks Rank #1.

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