Analysts' Choice: Juniper Finds Its Growth In The Cloud

6/26/2017


  Recent Price
$29
  Dividend
$0.40
  Yield
1.4%
  P/E Ratio
13
  Shares (millions)
388
  Long-Term Debt as % of Capital
30%
  52-Week Price Range
$30.96 - $21.17

You may not be able to see Juniper Networks' ($29; JNPR) products. But if you watch television, talk on the phone, or bank online, you probably use them. The company sells equipment spanning the breadth of the computer-networking business, building and managing communications systems for both commercial and government customers.

Products that route data from one place to another generated 43% of company revenue in the March quarter, while switches generated another 20% and security products 5%. Switching revenue jumped 38% in the quarter, mostly on the strength of the cloud business.

The remaining 32% of revenue came from services, an increasingly important part of the networking market. Services revenue rose 14% in the quarter, outstripping the 10% gain in product sales.

Juniper shares trade at 13 times trailing earnings, a 33% discount to their own three-year average and 21% below the median for communications-equipment companies in the S&P 1500 Index. We initiated coverage of Juniper as a Buy and a Long-Term Buy in the June 12 issue.

Head in the cloud

Juniper is best known for its telecom routers. But, like many tech peers, the company is making a larger portion of its sales to cloud users these days. Cloud computing involves remote networks of servers accessed via the internet, instead of hardware on a company's premises. Sales of products and services geared for cloud computing jumped 25% in the March quarter and accounted for 27% of Juniper's revenue. Telecom and cable customers generated 47% of revenue (10% growth in the quarter), while other customers contributed 26% of revenue (2% growth).

In May, the company said its cloud business has been growing sales roughly 25% a year since 2014, implying such a pace should continue. The company also sees opportunities in the market for optical products, which use lasers or electromagnetics to transfer data.

Juniper topped the analyst profit consensus in each of the last four quarters, and the full-year profit target is on the rise. In the March quarter, the company pulled out of a slump, enjoying its first double-digit sales gain in five quarters and its first double-digit profit gain in six quarters.

The consensus projects sales growth of 5% and per-share-profit growth of 7% this year, followed by 3% sales growth and 6% profit growth in 2018. Those targets seem unduly conservative given Juniper's operating momentum.

Giving back

Juniper targets the return of 50% of free cash flow to shareholders this year. Over the last 12 months, the company generated $1.13 billion in free cash flow and spent $459 million (41% of free cash flow) on dividends and buybacks, with buybacks accounting for about two-thirds of the money. The company's target points to more buybacks, continuing a trend that has reduced the share count by 22% over the last three years.

You can obtain an annual report for Juniper Networks Inc. at 1133 Innovation Way, Sunnyvale, CA 94089, (408) 745-2000, www.juniper.net.

JUNIPER NETWORKS
Quarter
Per-Share Earnings*
($)
Sales
Change
Quarterly
Price Range
($)
P/E Ratio
Range
Mar '17
0.46
vs.
0.37
11%
29.10
-
24.90
14 - 12
Dec '16
0.66
vs.
0.63
5%
29.21
-
22.41
14 - 11
Sep '16
0.58
vs.
0.57
3%
24.45
-
21.18
12 - 10
Jun '16
0.50
vs.
0.53
0%
25.69
-
21.17
12 - 10
           
Year
(Dec.)
Sales
 ($Bil.)
Per-Share
Earnings*
($)
Per-Share
Dividend
($)
52-Week
Price Range
($)
P/E Ratio
Range
2016
4.99
2.09
0.40
29.21
-
21.17
14 - 10
2015
4.86
2.03
0.40
32.39
-
21.24
16 - 10
2014
4.63
1.45
0.20
28.75
-
18.41
20 - 13
2013
4.67
1.28
0.00
22.98
-
15.62
18 - 12
 
Quadrix Scores †
Overall
Momen-
tum
Value
Quality
Financial
Strength
Earnings
Estimates
Performance
97
87
90
83
65
74
48

   * Earnings exclude special items.
   † Quadrix scores are percentile ranks, with 100 the best.
   NA Not available.


Current Hotline

Stock Spotlight

Individual Stock Reports

ISRs make stock research easy!

Perhaps the most valuable two page reports available anywhere.

All the data you would normally have to plow through years of 10-K filings, earnings reports, and reams of market data to assemble — yours all in one concise report.

ISRs contain our proprietary Quadrix scores — find out how we rate all the stocks in the S&P 500.

Visit us at individualstockreports.com