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Juniper has 20% top line growth prospects
Wed, 10/20/10 - 9:21pm    View comments

JuniperMark SueToday, RBC Capital Markets Managing Director - Mark Sue, provided his take on Juniper's 3Q10 financial results, "Juniper's quarter was uncharacteristically light as some orders came in later than usual and the company was supply constrained on new products. Nonetheless, just about everything spilled over into the current quarter and if anything, the company is increasing the guidance for 4Q10 to $1.12B (+ 12% QoQ) vs. the Street of $1.099B. The net is that our CY11 increases from $1.50 to $1.54. Considering Juniper's 20% top line growth prospects, its position with carriers and improving earnings outlook, we would add on the dips towards our target of $35.

"Book-to-bill was meaningfully greater than 1.0 and total deferred revenues grew +2% to $785M of which product deferred grew +9% QoQ. Product backlog is now $325M (+25% QoQ). The MX series was $176M (+18% QoQ), while the specific MX3D totaled $63M on orders of $87M with demand outstripping supply. In enterprise, the EX series ended at $102M and grew +11% QoQ."

Sue continued, "Revenues from service providers (63%) increased to $634M (+2% QoQ) and Enterprise (37%) revenues increased to $378M (+6% QoQ). Juniper saw high demand for edge routing and high-end firewall products from the service providers and switching and branch firewall products from the enterprise segment. A portion of federal revenues was pushed into 4Q10 due to a budget continuation measure.

"U.S. revenues (53%) increased to $533M (+8% QoQ) due to strong demand from cable operators and service providers. North American service provider capex may still be back-end loaded and Juniper may have the relationships to have good visibility in capex spending throughout the quarter. European revenues declined to $276M (-5% QoQ) due to weakness in the Middle East and Eastern Europe, but was offset by strength in UK, France and Netherlands. APAC revenues increased to $204M (+20% QoQ) due to strong demand from China, South Korea and Australia."

Sue added, "GMs ended slightly lower at 67.5%, but within the guided range and OMs increased to 24.1%. Juniper continues to invest in sales and marketing and plans to reduce R&D as a percentage of revenues to stick to their OM target of 25%. Juniper generated $131M in cash from operations and ended the quarter with a cash balance of $2.7B ($5.19/share)."

Sue concluded, "There are a lot of new products for Juniper and demand remains healthy although it won't always be linear growth. And the late order trends noted in 3Q are something that will need monitoring. Overall, the long term trends remain favorable for Juniper and with an arsenal of new products including Falcon and Stratus (entering testing), Juniper may grow faster than the market."

View Juniper's 3Q10 earnings call transcript.

Juniper vs. Cisco stock price chart

Juniper vs. Cisco stock price chart
Source: Yahoo! Finance

Why do you agree with Mark Sue that Juniper has 20% top line growth propects?

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