Network equipment-maker Juniper Networks (JNPR, Financial) posted higher-than-expected results in the first quarter of 2014 on the back of healthy demand. Its results were driven by various strategic initiatives such as cost cutting and restructuring efforts that are driving its operational efficiency, leading to an increase of 150 basis points in its margins during the quarter. Juniper also managed to reduce its expenses by $160 million.
Juniper’s revenue came in to $1.17 billion, an increase of about 10% year over year, outpacing the consensus estimates of $1.15 billion for the quarter. Its non-GAAP net income rose nearly 22% year over year to $142.6 million, or earnings of $0.29 per diluted share.
Juniper Networks also provided a fine outlook for the second quarter as it expects its revenue to be in the range of $1.2 billion to $1.23 billion, while its earnings are expected to fall in between $0.36 and $0.39 per share, similar to the market forecasts of $0.36 per share.
Furthermore, the maker of computer-networking equipment plans to return at least $3 billion to its shareholders through stock repurchases and dividend over three years. The company has already bought back shares worth $900 million in the first quarter.
Juniper Networks' revenue gaining products such as EX and QFabric are driving its growth in the enterprise market. Its enterprise revenue grew an amazing 46% in the reported quarter. Juniper has also witnessed strong momentum with its newly launched MX line of edge routers that has received positive response in the market and continues to grow. The company expects these products to drive its sales going forward and offset weakness in the core due to unevenness in order bookings.
The Integrated Operating Plan has added tremendous value to its restructuring plan that promises to streamline research and development costs, as the company focuses on the new consolidated R&D structure that should optimize its engineering resources. The IOP is estimated to eliminate about $160 million in annualized structural cost from its operations.
The company has experienced solid demand from its service providers across web 2.0, cable, and carriers worldwide, as well as from the Americas Enterprise customers, all of which indicate incredible opportunity to penetrate further in the markets and lock up shares in the meaningful, high-growth segments like Cloud-Builder and High IQ networking.
According to a Cisco report released in February, U.S customers will download more data on their smartphones and tablets in 2018 than they did on their laptops in 2013. Hence, it should certainly help Juniper to increase its share in the telecom market. The telecom services business currently accounts for more than two-thirds of Juniper's total revenue. In addition, the capital expenditure for telecom giants is continuously increasing.
All-in-all, the company’s prospects look good as it remains firmly committed to its existing security, switching, and routing businesses. Moreover, its high-growth yielding strategy for high IQ network and cloud builder looks quite impressive. Its recent products such as MX Universal and PTX logo are on the ramp and winning quite a lot of market share. The company is counting heavily on its MX2020 product and will begin taking orders for the world’s fastest rich IP line cards with the MX2020 clocking in at over a half of terabit per second.
Juniper is also encouraged by the early sales of its recently launched QFX5100 top-of-rack switch in both enterprise and service provider applications. It has observed considerably good traction with its 100 Gig-E SRX I/O Card that was launched recently. These products are rapidly winning market for the company and should generate high margins for the company going forward.
Juniper Networks currently trades at the forward P/E multiple of 12.13 as against trailing P/E multiple of 26.81, along with PEG ratio of 1.06, slightly above one indicate high growth for the company in the future. The company has total operating cash of $977.2 million, along with leverage free cash flow of $547 million, while its total debt remains at $1.35 billion, which is well mixed by most measure. Moreover the analysts have forecasted CAGR of 14.15% for the next five years, which reflects tremendous growth opportunities for the company going forward. Investors shouldn’t miss picking the stock as it promises great return in the future.