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Cloud Computing Weakness to Hurt Juniper's (JNPR) Q3 Earnings
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Juniper Networks Inc (JNPR - Free Report) is set to release third-quarter 2017 results on Oct 24.
Notably, the company has a positive record of earnings surprises in each of the trailing four quarters, with an average surprise of 7.85%. In the last quarter, Juniper delivered a positive earnings surprise of 5.56%.
Nevertheless, third-quarter results are anticipated to suffer from weakness in the cloud computing segment. The weakness in cloud computing segment is likely to hurt switching business, which surged 31.9% year over year to $276 million.
The Zacks Consensus Estimate for revenues for the Switching segment is currently pegged at $276 million.
Management recently lowered its revenue outlook in the range of $1.25-$1.26 billion, down from previous expectation of $1.29-$1.35 billion.
Moreover, earnings are now projected in the range of 54-56 cents per share, down from previous guidance of 55-61 cents.
Notably, Juniper’s shares have lost 8.7% of its value year to date compared with the 4.8% decline of its industry.
Intensifying Competition Hurts Router Segment
Juniper is facing significant pricing pressure amid intensifying competition in the network equipment market from the likes of Arista Networks Inc (ANET - Free Report) , Cisco Systems Inc (CSCO - Free Report) and others including white-box vendors.
The company’s routing business has been hurt by this competition. In the last quarter, routing category revenues remained almost flat at $572.5 million. The Consensus Estimate for the Routing segment is currently pegged at $589 million.
Unfavorable Customer, Product Mix to Hurt Gross Margin
Juniper’s expansion into low-margin Asia-Pacific market adversely impacted customer mix, which is expected to affect profitability.
Further, growing proportion of low-margin switch business in the product mix as compared with high-margin router business is a headwind for gross margin expansion. Additionally, higher DRAM memory prices are expected to hurt gross margin in the quarter.
Expanding Portfolio to Offset Weakness
Juniper has witnessed accelerated demand and adoption of its Software Defined Secure networks (SDSN) platforms. In the last quarter, the platform was enhanced with security enforcements, which protects data transmission and computing on enterprise networks as well as public and private clouds from breaches.
Moreover, we believe Juniper’s latest introduction, Contrail Security, which ensures protection for applications that are deployed in volume-loaded heterogeneous cloud-based environments is a key catalyst.
The company recently unveiled Cloud-Grade Networking, which covers telemetry, automation and machine learning processes. This is also expected to drive the top line in the near term.
We believe that Juniper is unlikely to deliver a positive earnings surprise in the third-quarter due to an unfavorable combination of Zacks Rank #4 (Sell) and Earnings ESPof -2.71%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
We don’t recommend Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here is a stock you may consider as our proven model shows it has the right combination of elements to post an earnings beat this quarter:
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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Cloud Computing Weakness to Hurt Juniper's (JNPR) Q3 Earnings
Juniper Networks Inc (JNPR - Free Report) is set to release third-quarter 2017 results on Oct 24.
Notably, the company has a positive record of earnings surprises in each of the trailing four quarters, with an average surprise of 7.85%. In the last quarter, Juniper delivered a positive earnings surprise of 5.56%.
Nevertheless, third-quarter results are anticipated to suffer from weakness in the cloud computing segment. The weakness in cloud computing segment is likely to hurt switching business, which surged 31.9% year over year to $276 million.
The Zacks Consensus Estimate for revenues for the Switching segment is currently pegged at $276 million.
Management recently lowered its revenue outlook in the range of $1.25-$1.26 billion, down from previous expectation of $1.29-$1.35 billion.
Moreover, earnings are now projected in the range of 54-56 cents per share, down from previous guidance of 55-61 cents.
Notably, Juniper’s shares have lost 8.7% of its value year to date compared with the 4.8% decline of its industry.
Intensifying Competition Hurts Router Segment
Juniper is facing significant pricing pressure amid intensifying competition in the network equipment market from the likes of Arista Networks Inc (ANET - Free Report) , Cisco Systems Inc (CSCO - Free Report) and others including white-box vendors.
The company’s routing business has been hurt by this competition. In the last quarter, routing category revenues remained almost flat at $572.5 million. The Consensus Estimate for the Routing segment is currently pegged at $589 million.
Unfavorable Customer, Product Mix to Hurt Gross Margin
Juniper’s expansion into low-margin Asia-Pacific market adversely impacted customer mix, which is expected to affect profitability.
Further, growing proportion of low-margin switch business in the product mix as compared with high-margin router business is a headwind for gross margin expansion. Additionally, higher DRAM memory prices are expected to hurt gross margin in the quarter.
Expanding Portfolio to Offset Weakness
Juniper has witnessed accelerated demand and adoption of its Software Defined Secure networks (SDSN) platforms. In the last quarter, the platform was enhanced with security enforcements, which protects data transmission and computing on enterprise networks as well as public and private clouds from breaches.
Moreover, we believe Juniper’s latest introduction, Contrail Security, which ensures protection for applications that are deployed in volume-loaded heterogeneous cloud-based environments is a key catalyst.
The company recently unveiled Cloud-Grade Networking, which covers telemetry, automation and machine learning processes. This is also expected to drive the top line in the near term.
Juniper Networks, Inc. Price and EPS Surprise
Juniper Networks, Inc. Price and EPS Surprise | Juniper Networks, Inc. Quote
Unfavorable Rank, Negative ESP
We believe that Juniper is unlikely to deliver a positive earnings surprise in the third-quarter due to an unfavorable combination of Zacks Rank #4 (Sell) and Earnings ESPof -2.71%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
We don’t recommend Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here is a stock you may consider as our proven model shows it has the right combination of elements to post an earnings beat this quarter:
NVIDIA Corporation (NVDA - Free Report) has an Earnings ESP of +1.06% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
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