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Juniper Networks: Strong Buy

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On Mar 5, 2014, Zacks Investment Research upgraded Juniper Networks Inc. (JNPR - Free Report) to a Zacks Rank #1 (Strong Buy) based on the positive estimate revisions witnessed over the last 30 days.

Why the Upgrade?

Juniper has been witnessing positive estimate revisions for the fiscal 2014 which led the earnings per share to rise from $1.04 to $1.14 over the last 30 days.

Moreover, some of the optimism was due to positive news flow over the couple of weeks. Recently, Juniper entered into an accelerated share repurchase (ASR) agreement with Barclays Bank plc and Goldman, Sachs & Co. (GS - Free Report) as part of its new capital allocation strategy.

Per the agreement, Juniper will purchase shares worth $1.2 billion from the two entities with the cash in hand. Juniper’s new capital allocation strategy also requires it to return $3 billion over the next three years. Per the strategy, shares worth $2 billion are to be repurchased (including the current ASR program) by the end of the first quarter of 2015. The balance is to be distributed as dividends that will be initiated from the third quarter of 2014.

Moreover, the company expects to streamline its cost structure and business model with One-Juniper initiative. As part of this initiative, the company will combine its engineering teams, go-to-market teams and research & development teams to provide a comprehensive and innovative solution to customers.

Additionally, increased spending by service providers should support Juniper’s near-term fundamentals. The company’s expansion into the software defined network segment is expected to strengthen its position in the networking space.

While the company’s new products, cost reduction initiatives and improving execution remain the growth catalysts, increasing competition from Cisco (CSCO - Free Report) and AT&T (T - Free Report) , uncertain economic conditions and constricted federal spending are the possible headwinds.

Other stocks to Consider

Apart from Juniper, Lexmark International also sports a Zacks Rank #1 and warrants a look.

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