What To Expect From Juniper’s Third Quarter Earnings

Juniper Networks (NYSE:JNPR) is scheduled to announce its third quarter results on Tuesday, October 23. Juniper’s core product sales have declined in recent years, which has been accompanied by a fall in product gross margins. This trend continued in the current year as well. While services revenues remained flat over the prior year period, the 8-10% decline in product sales has led to overall negative revenue growth for the company. In addition, margins have suffered considerably through the year thus far, with the company failing to meaningfully reduce operating expenses through the first half of the year. For the September quarter, Juniper’s gross margins are expected to be up sequentially, but are still likely to be considerably lower on a y-o-y basis. We have summarized Q3’18 expectations on our interactive earnings preview dashboard for Juniper. If you disagree with our forecasts, you can change the key drivers including segment revenue growth and margins for Juniper to gauge how changes will impact its EPS for the quarter.

We forecast Juniper’s core router and switches revenues to decline by around 10% on a y-o-y basis to $525 million and $195 million, respectively. The company has reported similar declines in recent quarters. On the other hand, sSecurity revenues are expected to be 1-2% higher on a y-o-y basis to $75 million. These revenues have bounced back slightly after witnessing high single digit declines last year.  Similarly, we forecast services revenues to increase by low single digits to over $390 million for the quarter. Accordingly, net revenues are projected to be almost $1.19 billion, slightly higher than the midpoint of the company’s guided range. Juniper’s operating margin (non-GAAP) is expected to be around 6-7 points lower over Q3’17 at around 17.1%. It should be noted that while the expected operating margin is considerably lower on a y-o-y basis, it would be sequentially flat relative to the June quarter. Furthermore, margins are expected to return to prior year levels by the end of the year. Accordingly, net income and EPS are also expected to be over 25-30% lower on a y-o-y basis to $155 million and $0.44 for the quarter, respectively.

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