A month has gone by since the last earnings report for Juniper Networks (JNPR). Shares have added about 5.8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Juniper due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Juniper Beats Q3 Earnings Estimates on Record Revenues
Juniper reported solid third-quarter 2022 results, wherein the bottom line and the top line beat the respective Zacks Consensus Estimate. The solid performance was driven by record revenues with double-digit year-over-year growth across all customer verticals and all customer solutions. Juniper expects this healthy growth momentum in the impending quarters as well, owing to robust demand trends.
On a GAAP basis, net income in the third quarter improved to $121.5 million or 37 cents per share from $88.9 million or 27 cents per share in the prior-year quarter. The improvement was led by top-line growth with attractive opportunities across enterprise, cloud and service provider markets.
Non-GAAP net income was $190.8 million or 58 cents per share compared with $152 million or 46 cents per share in the year-ago quarter. The bottom line beat the Zacks Consensus Estimate by 8 cents.
Juniper’s quarterly revenues increased to $1,414.6 million from $1,188.8 million in the prior-year quarter, led by strong demand across all customer verticals and all customer solutions. The top line beat the consensus estimate of $1,351 million.
Product revenues (contributing 68.4% to total revenues) grew 25.3% year over year to $967.5 million, reflecting healthy demand across the MX and PTX product families with the adoption of newer products and the automation software portfolio. Service revenues (contributing 31.6% to total revenues) increased 7.2% to $447.1 million, led by renewals and service attach rates.
By vertical, revenues in Cloud increased to $375.3 million from $303.3 million. Revenues in Service Provider increased to $523.1 million from $445.8 million in the year-ago quarter. Revenues in Enterprise improved to $516.2 million from $439.7 million.
By region, revenues declined to $320.4 million from $336.3 million in the year-ago quarter in Europe, the Middle East and Africa. Revenues in the Americas increased to $895.8 million from $664.8 million. In the Asia Pacific, revenues were up 5.7% to $198.4 million.
Gross profit was $787.8 million compared with $692.2 million in the year-ago quarter. Total operating expenses increased to $638.5 million from $572.1 million. Operating income was $149.3 million compared with $120.1 million a year ago. Non-GAAP operating income was $243.7 million, up from $197.8 million, with respective margins of 17.2% and 16.6%.
Cash Flow & Liquidity
In the first nine months of 2022, Juniper used $22 million of cash in operating activities against a cash flow of $573.7 million in the year-ago period. As of Sep 30, 2022, the company had $830.9 million in cash and cash equivalents with $1,595.7 million of long-term debt.
Due to the worldwide shortage of semiconductors, Juniper is experiencing supply headwinds resulting in extended lead times and higher logistics and component costs. These are expected to continue for the remainder of the year.
For the fourth quarter, the company expects revenues of $1,475 million (+/- $50 million). Non-GAAP gross margin is estimated to be 57% (+/- 1%). Non-GAAP operating expenses are expected to be $575 million (+/- $5 million). It anticipates non-GAAP operating margin to be about 18% at the mid-point of the revenue guidance. Non-GAAP net income is expected to be 64 cents per share (+/- 5 cents), assuming a share count of nearly 330 million. Non-GAAP tax rate is likely to be around 19%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
Currently, Juniper has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Juniper has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Juniper is part of the Zacks Wireless Equipment industry. Over the past month, Ericsson (ERIC), a stock from the same industry, has gained 9.4%. The company reported its results for the quarter ended September 2022 more than a month ago.
Ericsson reported revenues of $6.46 billion in the last reported quarter, representing a year-over-year change of -0.7%. EPS of $0.16 for the same period compares with $0.21 a year ago.
Ericsson is expected to post earnings of $0.18 per share for the current quarter, representing a year-over-year change of -50%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Ericsson. Also, the stock has a VGM Score of B.
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