Juniper’s Q2 Results Likely To Be Subdued, But Growth Should Return Over Coming Months

by Trefis Team
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Juniper Networks (NYSE:JNPR) reports its Q2 results on July 25. In Q1, the company beat consensus expectations on revenue and EPS. Going into Q2, we will be listening in on:

  • Impact of U.S.-China trade dispute: While the issues seem to have subsided, we will be looking for the management’s view to understand the situation on the ground.
  • Commentary around cloud and service provider recovery: The management has expressed confidence that growth is likely to return in 2H19. Furthermore, the management had mentioned the lack of any competitive displacement with port growth remaining encouraging.
  • Benefits from change in the company’s go-to-market strategy: In Q1 the management had highlighted changes to its sales force to capture market opportunities better. We will be hoping to hear for increased traction from the changes made.

Trefis estimates Juniper’s valuation to be $28 per share, which is slightly ahead of the current market price. We capture trends in Juniper’s Earnings over recent quarters in an interactive dashboard along with our forecast for full-year 2019. You can modify any of the key drivers to visualize the impact of changes on the company’s share price estimate. Additionally, you can see more Trefis technology company data here.

A Quick Look At Juniper’s Revenues

Juniper makes money selling networking and security solutions to enterprises. The company reports its revenues ($4.7 billion in 2018) in two major segments:

  • Products ($3.1 billion in 2018 revenue, 67% of total revenue): Segment revenues are derived from the sale of networking and security products.
  • Services ($1.5 billion in 2018 revenue, 33% of total revenue): Segment revenues are derived from the sale of related professional services.

Juniper’s Operating Trends Over Recent Years, And Our Expectations For 2019

  • Juniper’s Revenues (shows key revenue components) have fallen from almost $5 billion in 2016 to $4.65 billion in 2018, but we expect the figure to increase slightly to $4.7 billion for full-year 2019.
    • Total Product revenues reached $3.11 billion in 2018 from $3.53 billion in 2016. The decline in revenues can primarily be attributed to the reduction in routing product sales for Juniper – partially offset by an small increase in switching product revenues. We expect 2019 revenue to reach $3.2 billion (0.6% y-o-y).
    • Total Service revenue increased marginally to $1.54 billion in 2018 from $1.46 billion in 2016. We expect 2019 revenue to reach $1.6 billion (1.1% y-o-y).
  • Juniper’s net income margin figure has largely been around 12% over recent years (with the notably lower figure for 2017 attributable to one-time tax losses). We expect the margin figure to improve to 15% for full-year 2019 – helping the net income cross $700 million for the year from $567 million in 2018

Per Trefis estimates, Juniper’s EPS for full-year 2019 is expected to be $2.12. Taken together with a P/E of 13x, we arrive at a fair value of $28 for Juniper’s stock (shows cash and valuation analysis), which is slightly ahead of the current market price.

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