A month has gone by since the last earnings report for Juniper Networks (JNPR). Shares have lost about 2.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Juniper due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Juniper's Q1 Earnings Top Estimates on Solid Revenues
Juniper reported impressive first-quarter 2023 results, with the bottom and the top line beating the respective Zacks Consensus Estimate. Despite market uncertainties, the company witnessed a healthy revenue growth year over year. The upside can be attributed to significant growth in AI-Driven Enterprise solutions, Service Provider and Enterprise verticals. Easing of supply chain and elevated logistic and component costs also cushioned the top line to some extent.
On a GAAP basis, net income in the first quarter rose to $85.4 million or 26 cents per share from $55.7 million or 17 cents per share in the prior-year quarter. The 53% year-over-year improvement, despite higher operating expenses, was primarily propelled by top-line expansion.
Non-GAAP net income was $156.6 million or 48 cents per share compared with respective figures of $101.6 million or 31 cents per share in the prior-year period. The bottom line beat the Zacks Consensus Estimate by 5 cents.
Quarterly revenues stood at $1,371.8 million, up from $1,168.2 million. Solid growth in Enterprise and Service Provider vertical boosted the top line. However, declining net sales in Cloud vertical partially reversed this positive trend. The top line beat the Zacks Consensus Estimate of $1,345 million.
Product revenues were $912.6 million compared with $744.3 million reported in the prior-year quarter. Service revenues totaled $459.2 million, up 8% year over year owing to high sales of SaaS and software subscriptions.
By vertical, Cloud revenues declined to $264.9 million from $307 million in the year-ago quarter. Many customers rescheduled the project timeline, which affected Cloud revenues in the quarter. Net sales from Service Provider climbed to $549.9 million from $428 million reported in the prior-year period. Improvement in Automated WAN Solutions and AI-Driven Enterprise supported the year-over-year gain from this vertical. Revenues from Enterprise were $557 million, up 29% year over year owing to net sales growth in all customer solutions. Rising demand for Juniper’s cloud-native AI-driven architecture supported the top line.
By customer solution, Automated WAN solutions revenues amounted to $474.5 million, up 21% year over year. Net sales from AI-Driven Enterprise were $317 million, up 48% year over year. Revenues from Cloud-Ready data centers stood at $193.6 million, up 3% year over year.
By region, revenues from Americas rose to $798.5 million from $655 million in the year-ago quarter. Revenues from Europe, the Middle East and Africa (EMEA) increased to $369.9 million from $333.9 million in the prior-year quarter. In the Asia Pacific, net sales were up 13% year over year to $203.4 million. The improvement in Service Provider and Enterprise verticals propelled net sales growth in all the regions. However, a decline in Cloud partially hindered this trend.
Gross profit totaled at $771.2 million compared with $649.4 million in the year-ago quarter. Non-GAAP gross margin were 57.8%, higher than midpoint of the guided range owing to net sales growth, favorable customer mix and an improvement in logistics and supply chain costs. Non-GAAP operating margin increased to 14.8% from 11.8% reported in the year-ago quarter. Non-GAAP operating expenses rose 10% year over year, primarily due to headcount related costs.
Cash Flow & Liquidity
In first-quarter 2023, Juniper generated $191.5 million of cash from operating activities compared with $193.1 million in the prior-year period.
As of Mar 31, 2023, the company had $923.5 million in cash and cash equivalents with $1,616.7 million of long-term debt.
Despite some improvement, Juniper is still experiencing supply chain challenges and elevated logistics and component costs. The company is planning to work closely with suppliers to minimize the effects of these disruptions. Against the backdrop of macroeconomic challenges, management expects these issues will continue to affect a portion of JNPR’s portfolio through 2023.
For the second quarter, the company approximates revenues of $1,410 million (+/- $50 million). Non-GAAP gross margin is estimated at 58% (+/- 1%). Management expects non-GAAP operating expenses to be $590 million (+/- $5 million). It anticipates the non-GAAP operating margin to be 16.2% at the mid-point of the revenue guidance. The non-GAAP tax rate is approximated at 19%. Assuming a share count of close to 328 million, non-GAAP net income is anticipated to be 54 cents per share (plus or minus 5 cents).
For 2023, management expects sequential revenue growth with normal seasonal patterns. It expects to deliver 9% revenue growth for the full year. Non-GAAP gross margin is approximated at 58% in 2023.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
At this time, Juniper has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. Following the exact same course, 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 A. 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.
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