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Juniper Networks: Strong Results Are an Indication of a Better Future

May 03, 2014 | About:
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Juniper Networks (JNPR), one of the pioneers in network infrastructure innovation, came up with impressive first quarter results for fiscal 2014. It beat its own higher-end of guidance on revenue and also managed to expand operating margins on the back of impressive cost control initiatives. It recorded a 10% year-over-year growth in revenue. On the heels of solid top line growth, its earnings per share, or EPS, increased to $0.29 from $0.24 in the year-ago quarter, representing a whopping 21% year-over-year growth in EPS.

Encouraged by performance, Robyn Denholm, chief financial and operations officer of Juniper Networks, went on to say:

"I am pleased with our first quarter results, which reflect our seventh consecutive quarter of year-over-year revenue growth and our fifth consecutive quarter of earnings growth."

Strategic Moves Are Working Well

Juniper continued to benefit from healthy top line growth. Also, the restructuring program helped it to expand the operating margin by 150 basis points versus the prior year quarter. The restructuring plan received a boost with the recently announced “Integrated Operating Plan,” or IOP, which is expected to save the company about $160 million in annualized operating expenses by the end of first quarter of 2015. Going forward, the costs involved in restructuring are going to impact profitability in the near term, but the recurring savings will drive long-term value in the stock.

With macroeconomic headwinds becoming a thing of the past, service providers are investing heavily in upgrading their network infrastructure. The proliferation of mobile devices, resulting in sustained high demand for data, and high demand for video content on the web have forced service providers to upgrade their network infrastructure. Almost two-thirds of Juniper’s revenue comes from the service provider segment. Verizon (VZ) and AT&T (T) have been big Juniper customers, with each accounting for about 10% of Juniper’s revenues in recent years.

Key Customers and Product Development

AT&T, for example, has listed Juniper as one of the vendors that will help AT&T toward the vision of the User-Defined Network Cloud. This initiative builds on AT&T's best-in-class network status and is expected to accelerate time-to-market with technologically advanced products and services. AT&T is not revising its previously announced capital expenditure as a result of this announcement. However, going forward, this win is going to be a growth driver for Juniper.

In addition, Juniper recently announced the Virtual Converged Cable Access Platform, or Virtual CCAP, a groundbreaking solution from its collaboration with Gainspeed. Through the integration of Gainspeed's technology with Juniper Networks® MX Series 3D Universal Edge Routers and EX Series Switches, the new Virtual CCAP solution will allow cable operators to better automate and scale their edge/access network infrastructure and create a platform for new cloud-based services for residential and commercial subscribers at a dramatically lower cost point. Going forward, this will give a further boost to its routing revenues, which went up by 7% year-over-year in the recent quarter.

In addition, Juniper has also teamed up with VeriSign to provide a hybrid solution for DDoS protection that effectively combats the growing diversity of DDoS attacks. This solution provides technologies from both companies to enable both on-premise and cloud-based DDoS protection for customers. With DDoS becoming one of the major cyber security risks for businesses of all sizes across all verticals, this initiative is also bound to be a growth driver going forward, with customers being large banks, global financial companies and enterprise class customers.

Conclusion

So Juniper is expected to see growth from a number of quarters and this makes the company a sound bet for the future. As such, investors should definitely take a close look at the stock as it could gain further on the back of big customers and developments in the end market.


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