Juniper shares jump on earnings, Wall Street kudos

Juniper Networks surged more than 10 percent after the company reported strong fourth-quarter results and upped its guidance for 2001.

Juniper beats the street yet again Scott Kriens, Juniper CEO

Analysts reiterated their top ratings and said the Mountain View, Calif.-based company is on track to keep gaining market share from Cisco Systems, praising the company's visibility.

Shares in the Internet routing company were up $13.09, or just over 10 percent, to $141.09 on Wednesday after its Tuesday night report, which showed pro forma net income of $84.6 million, or 24 cents per share, on revenue of $295.4 million. That compares with earnings of $4.8 million, or 1 cent per share, on revenue of $45.4 million for the same period in 1999.

Juniper's sales were impressive in light of how badly the telecommunications sector has been pounded recently.

On a conference call with analysts, Juniper Chief Executive Scott Kriens said there is "clear evidence that we are seeing reduced visibility." Nevertheless, the company was able to raise guidance for the first quarter and the fiscal year, a feat that analysts lauded.

For the first quarter, Juniper expects revenue to increase sequentially by 12 percent to 15 percent, up from the previous guidance of 10 percent. For fiscal 2001, the company expects to more than double revenue to $1.5 billion to $1.6 billion, up from the previous guidance of $1.3 billion to $1.4 billion.

SG Cowen Securities analyst Christin Armacost reiterated a "strong buy" and target price of $175 a share, praising the company's quality and visibility.

"Given that the company continues to raise guidance and plans to double its headcount in 2001, we believe that, relatively, Juniper has some of the best visibility of the companies we track and remains more immune" to a downturn in capital expenditures, Armacost wrote in a research note.

Armacost upped her 2001 revenue estimate to the high end of company guidance--$1.6 billion, up from $1.33 billion--and raised earnings from 81 cents a share to $1.08 a share.

Goldman Sachs analyst Charlton Yu said the company's acknowledgement that overall visibility is lower, consistent with the tighter carrier market, will put it in even better standing with investors, who will "probably look beyond this and recognize that Juniper remains in an exceptional position in the most attractive market segment."

"The stock is likely to react positively as strong guidance from a conservative management team confirms a very bullish outlook," Yu wrote.

Gaining on Cisco?
The company also said Tuesday that it expects to maintain a 12-month technology lead over Cisco through new products and interfaces. Cisco has been battered by analysts who contend that the networking giant's glory days may be over.

Analysts foresee Juniper grabbing more market share based on its continued lead on Cisco and the introduction of new access products and wireless market opportunities. "We believe that Juniper likely gained 3 to 4 percent in market share with its performance this quarter," Armacost said. The company's third-quarter share was 30 percent.

Contributing to the company's market-share gains was its 12-month lead in the OC192 card, which is a key component in fiber-optic networks. Though Cisco is expected to release its OC192 during the March quarter, the company's gaining share does not necessarily equate to Juniper losing customers, said Armacost, noting that the market is projected to grow 150 percent in 2001.

"Although concerns about the stock's valuation and Cisco's pending availability of OC192 remain in investor minds, we believe that the company's long-term outlook remains gaited only by its execution and ability to expand its addressable market," Armacost wrote, in the sole expression of any possible negatives for Juniper in its upcoming quarters.

Positives
Customer diversification, high margins, a strong cash balance, and a book-to-bill ratio of over 1 were all cited as reasons to believe Juniper is still going strong despite industry weakness.

Analysts were unanimous in their praise of the company's ability to diversify its customer base, which it said expanded to greater than 300 during the fourth quarter.

An especially important win was Telia, a Swedish company, which may presage coming increases in sales to European service providers in the next few quarters, according to Yu. "These customers have very strong financial positions and will be an excellent addition to Juniper's existing first-rate customer base," the analyst said.

Ericsson and WorldCom were the largest customers, both accounting for more than 10 percent of total revenue during the quarter.

The company's already high margins continued to increase, with gross margins up to 65.7 percent, above most analysts' estimates, due to a higher mix of interface cards, the higher-than-expected revenue, and an increase in production efficiencies.

Juniper's cash-flow-positive quarter helped it maintain a strong balance sheet; its total investments were steady at $1.6 billion.

Lehman Brothers analyst Mark Sue, who reiterated a "strong buy," also noted several positives around the bend.

"We believe Juniper will benefit from the rapid shift in spending from voice-centric to data optimized equipment, helping to cushion the impact from a temporary scale back in overall service provider spending," the analyst said in a research note.