Juniper (JNPR) Q3 Earnings Miss Estimates, Revenues Beat

Juniper Networks (NYSE:JNPR), Inc. JNPR reported relatively modest third-quarter 2020 results exhibiting top-line and bottom-line growth, with the former surpassing the Zacks Consensus Estimate but the latter marginally missing the same. The Sunnyvale, CA-based network products and services provider experienced solid demand during the quarter. Of the top 10 customers, four were Cloud, five were Service Provider and one was in Enterprise vertical.

Net Income

On a GAAP basis, net income in the September quarter increased to $145.4 million or 43 cents per share from $99.3 million or 29 cents per share in the prior-year quarter. The improvement was primarily attributable to income tax benefit during the quarter.

Non-GAAP net income was $144.4 million or 43 cents per share (in line with the mid-point of the company’s guidance) compared with $166.6 million or 48 cents per share in the year-ago quarter. The bottom line missed the Zacks Consensus

Estimate by a penny.

Juniper Networks, Inc. Price, Consensus and EPS Surprise

Revenues

Quarterly total revenues aggregated $1,138.2 million (above the mid-point of the management-provided guidance) compared with $1,133.1 million reported in the year-ago quarter. The marginal increase, despite coronavirus-led adversities leading to supply constraints and extended lead times, was largely driven by a healthy demand curve. Juniper experienced strong demand with orders growing double-digit in the Enterprise vertical year over year. The top line beat the consensus mark of $1,131 million.

Product revenues (comprising Routing, Switching and Security and contributing 64.5% to net revenues) in the quarter fell 1.3% year over year to $733.7 million. Despite healthy momentum in Routing products, Switching and Security business were affected by the virus outbreak. Service revenues (contributing 35.5% to net revenues) inched up 3.7% to $404.5 million, driven by strong renewals and service attach rates.

By vertical, revenues in Cloud declined to $253.1 million from $271.9 million, reflecting normal consumption patterns following five consecutive quarters of year-over-year growth. Revenues in Service Provider improved to $475.1 million from $452.5 million in the year-ago quarter despite coronavirus-related supply chain challenges. Revenues in Enterprise improved to $410 million from $408.7 million, owing to higher-than-anticipated results from U.S. Federal business and solid order momentum.

Region wise, revenues improved to $321.1 million from $301.5 million in the year-ago quarter in Europe, the Middle East, and Africa. Quarterly revenues in the Americas declined 3.8% to $624.3 million. In Asia-Pacific, net revenues increased 5.5% to $192.8 million.

Other Details

Overall, gross profit came in at $657.8 million compared with $678.4 million in the year-ago quarter. Total operating expenses fell from $539.9 million to $532.7 million with cost-cutting initiatives. Operating income was $125.1 million compared with $138.5 million in the year-ago quarter. Non-GAAP operating income declined to $194.7 million from $207.3 million, with a margin of 17.1% and 18.3%, respectively.

Cash Flow & Liquidity

For the first nine months of 2020, Juniper generated $486.2 million of net cash from operating activities compared with $433.2 million in the prior-year period. As of Sep 30, 2020, the company had $1,341.5 million in cash and cash equivalents with $1,714.1 million of long-term debt.

Q4 Outlook

Juniper provided guidance for the fourth quarter of 2020. It expects revenues of $1,190 million (+/- $50 million). Non-GAAP gross margin is anticipated to be 60% (+/- 1%). Non-GAAP operating expenses are expected to be $482 million (+/- $5 million).

The company estimates non-GAAP operating margin to be nearly 19.5% at the midpoint of revenue guidance. Non-GAAP net income is expected to be 53 cents per share (+/- 5 cents), assuming a share count of about 333 million. The sequential revenue and earnings growth as exhibited in the guidance is primarily driven by strong order backlog and healthy momentum in the business, and includes the impact of the acquisition of Netrounds but excludes any impact from the pending acquisition of 128 Technology.

Zacks Rank & Stocks to Consider

Juniper carries a Zacks Rank #3 (Hold), at present. Some better-ranked stocks in the broader industry are Viavi Solutions (NASDAQ:VIAV) Inc. VIAV, Altice USA, Inc. ATUS and Harmonic (NASDAQ:HLIT) Inc. HLIT, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Viavi delivered a positive earnings surprise of 17.5%, on average, in the trailing four quarters.

Altice has a VGM Score of A and has gained 2% in the past six months.

Harmonic has a long-term earnings growth expectation of 15%. It delivered a positive earnings surprise of 41%, on average, in the trailing four quarters.

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