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Juniper (JNPR) Down 5.7% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Juniper Networks (JNPR - Free Report) . Shares have lost about 5.7% 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 Q1 Earnings Miss Estimates, Revenues Beat

Juniper reported mixed first-quarter 2022 results, wherein the bottom line missed the Zacks Consensus Estimate, but the top line beat the same.

Net Income

On a GAAP basis, net income in the quarter improved to $55.7 million or 17 cents per share from a net loss of $31.1 million or a loss of 10 cents per share in the prior-year quarter. The improvement was led by higher operating income and zero loss on extinguishment of debt which was $60.6 million in the first quarter of 2021.

Non-GAAP net income was $101.6 million or 31 cents per share compared with $98.5 million or 30 cents per share in the year-ago quarter. The bottom line missed the Zacks Consensus Estimate by a penny.

Revenues

Despite ongoing supply chain challenges, Juniper’s quarterly revenues increased to $1,168.2 million from $1,074.4 million in the prior-year quarter, driven by robust demand reflecting strong execution across its product management, engineering and go-to-market organizations. The company witnessed double-digit order growth across all customer verticals and solutions. The top line beat the consensus estimate of $1,163 million.

Product revenues (contributing 63.7% to total revenues) grew 10.7% year over year to $744.3 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 36.3% to total revenues) increased 3.1% to $423.9 million, led by renewals and service attach rates.

By vertical, revenues in Cloud increased to $307 million from $270.7 million. This reflects the adoption of the 400-gig capable platform driven by the strength of the Junos Evolved operating system, differentiated silicon capabilities and deep engagement with important customers. These factors not only enable Juniper to maintain its core franchises but also secure a new footprint, including a large new hyperscale WAN deployment that should act as a tailwind for its business over the next few years.

Revenues in Service Provider decreased to $428 million from $438.2 million in the year-ago quarter. Revenues in Enterprise improved to $433.2 million from $365.5 million.

By region, revenues improved to $333.9 million from $311.1 million in the year-ago quarter in Europe, the Middle East and Africa. Revenues in the Americas increased to $655 million from $583 million. In the Asia Pacific, revenues were down 0.6% to $179.3 million.

Other Details

Gross profit was $649.4 million compared with $615.6 million in the year-ago quarter. Total operating expenses increased to $590.9 million from $587.8 million due to higher sales and marketing expenses. Operating income was $58.5 million compared with $27.8 million a year ago. Non-GAAP operating income was $137.4 million, up from $130.1 million, with respective margins of 11.8% and 12.1%.

Cash Flow & Liquidity

During first-quarter 2022, Juniper generated $193.1 million of cash from operating activities compared with $179.8 million in the year-ago quarter. As of Mar 31, 2022, the company had $1,013.3 million in cash and cash equivalents with $1,648.4 million of long-term debt.

Outlook

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 second quarter, the company expects revenues of $1,255 million (+/- $50 million). Non-GAAP gross margin is estimated to be 58% (+/- 1%). Non-GAAP operating expenses are expected to be $535 million (+/- $5 million). It anticipates non-GAAP operating margin to be about 15.4% at the mid-point of the revenue guidance. Non-GAAP net income is expected to be 45 cents per share (+/- 5 cents), assuming a share count of nearly 330 million. Non-GAAP tax rate is likely to be around 20%.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted 5.57% due to these changes.

VGM Scores

Currently, Juniper has a nice Growth Score of B, a grade with the same score on the momentum front. 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.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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