Q4 Preview: Juniper (JNPR) Pre Announcement Sets Low Bar, But Q1 Not Shaping Up Much Better

Shares of Juniper Networks, Inc. (NYSE: JNPR) have traded higher throughout the entire session Thursday, however, have just turned negative about an hour before the close. The company will report fourth-quarter 2011 results after the close.

The Street is currently expecting Juniper to post earnings of 28 cents per share on revenue of $1.13 billion. The company saw earnings of 35 cents per share during the same quarter last year. Sales totaled $1.189 billion.

Shares gained 18.3 percent to $20.41 at the end of December. The stock is up an additional 12.1 percent since then. Juniper shares have traded within a range of $16.67 to $45.01 over the last year.

Some key things to consider heading into results: NVIDIA's (Nasdaq: NVDA) reduction to its fourth-quarter revenue outlook on Tuesday. Though not direct competitors, the Thai flooding spreads to all sectors of the chips and servers sector.

Also, F5 Networks (Nasdaq: FFIV) reported a near-20 percent increase in revs for the quarter, topping analyst expectations for the period.

Earlier in January, Juniper pre-announced results in seeing non-GAAP earnings of 26 cents to 28 cents per share and revenue of $1.11 billion to $1.12 billion

Data from Bloomberg has 17 analysts at Buy, 21 with a Hold, and three at Sell. The Street's price target average is $23, with a low of $17 and high of $31.

Analyst Comments

• Goldman Sachs is looking for EPS of 28 cents and revs of $1.19 billion, toward the top of Juniper's outlook. Looking to the first quarter, Goldman sees revs of $1.05 billion and EPS of 23 cents, both below Street views.
  
  Goldman said its below-consensus view is driven by three factors: "(1) We are forecasting service provider capex to be up 3% yoy in 2012, down from 10% yoy growth in 2011. Juniper derives over 60% of its total revenue from the service provider vertical. (2) Cisco recently adopted a more aggressive stance in service provider routing, which we think is likely to drive margin and/or market share pressure for Juniper, (3) Plexus, which reported earlier last week, said on its conference call that it is benefiting from new wins and increased exposure to enterprise business at Juniper."
  
  
• JPMorgan sees the negative pre-announcement slightly tied to spending issues at AT&T (NYSE: T). Weakness in routers should offset gains from Plexus.
  
  Looking at the first-quarter, JPMorgan doesn't see an immediate rebound. The firm said, "Juniper's soft book-to-bill ratio of 1 in a seasonally strong Q4, suggests sluggish demand could persist into Q1’12. In addition, given what we believe are likely post T-Mobile deal distractions at AT&T, we believe major spending decisions could be on hold, reducing the potential rebound from what we believe was a Q4 spending hiatus." JPMorgan sees fourth-quarter EPS of 27 and revs of $1.115 million and first-quarter EPS of 29 cents and revs of $1.119 million.
  
  
• Deutsche Bank sees some share loss in Tier 1 LTE and carrier Ethernet edge roll-outs in calendar 2012. The firm said, "offsetting the share loss in edge is potential for Juniper's MPLS Super Core switch to see pilot runs in a few large telcos during 2H CY12; volume ramp in CY13" and beyond.
  
  Deutsche is cautious on Juniper's prospects into enterprise networking, giving three reasons: "1) lack of convenient solutions bundles (e.g. pricing the QFabric for 100s of ports versus for 1000s of ports); 2) minimal production IT experience with Juniper's fabric; and, 3) sparse enterprise IT feature support (versus Cisco's Nexus/TRILL) are limiting QFabric's appeal in mainstream data-center switch upgrade opportunities [a +$9 billion TAM in CY12; Infonetics data]."
  
  The firm is looking for fourth- and first-quarter EPS of 19 cents each.
  
  
• Wells Fargo is also looking for results to meet preannouncements. For the next quarter, the firm said concerns surrounded: "1) the Q4 book to bill was approximately one in a quarter it is typically greater than one; 2) key contract manufacturer Plexus recently noted ongoing volatility in its networking business entering 2012; and 3) recent carrier data points suggest nearterm spending trends may remain subdued."

Stay tuned to StreetInsider.com's EPS Insider section to see our analysis of the highly-anticipated quarterly results within seconds of their release. You can also check out Juniper's past performance at Streetinsider's Juniper's Income Statement.

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