A month has gone by since the last earnings report for Juniper Networks, Inc. JNPR. Shares have added about 2.5% in that time frame, underperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Recent Earnings

Juniper reported fourth-quarter 2016 adjusted earnings (including share-based compensation and share-based payroll tax expense) of $0.52 per share, which was in line with the Zacks Consensus Estimate and remained flat on a year-over-year basis.

Excluding these items, earnings were $0.66 per share as compared with $0.63 reported in the year-ago quarter.

Juniper’s revenues of $1.39 billion surpassed the Zacks Consensus Estimate and its own expectation of $1.35 billion (+/- $30 million). Revenues increased almost 5% on a year-over-year basis.

In 2016, earnings were $2.09 per share as compared with $2.06 reported in 2015. Revenues increased 2.7% to $4.99 billion. QFX family of products saw strong demand with revenue increasing more than 50% in 2016.

Quarter in Detail

Product revenues (71.1% of total revenue) increased 1.2% on a year-over-year basis to $985.6 million. On the other hand, services revenues (28.9% of total revenue) surged 15.7% to $400 million.

The networking solutions provider witnessed year-over-year revenue growth in the Switching product category, which increased 19.3% to $250.8 million. Routing category revenues also inched up almost 1% year over year to $654 million. However, Security revenues plunged 30.4% to $80.8 million.

Juniper’s cloud products gained traction during the quarter as five out of top 10 customers were cloud providers. Both switching and routing performed well. Juniper noted strong demand for its QFX family of products, revenues from which soared 90% on a year-over-year basis.

Moreover, PTX had another record quarter while MX revenue also increased sequentially as new line card demand continues to grow.

Geographically, the company registered a year-over-year increase in revenues from America (up 16%), while revenues from EMEA and Asia Pacific (up roughly 12%) slumped almost 9% and 11.1%, respectively.

Adjusted gross margin contracted 120 basis points (bps) year over year to 62.7%, primarily due to unfavorable product and geography mix along with pricing pressure. Gross margin was close to management’s guidance of 63% (+/- 0.5%).

General & Administrative (G&A) and Sales & Marketing (S&M) expenses decreased 12.3% and 0.5%, year over year in the reported quarter, respectively. However, Research & Development (R&D) increased 6.4% from the year-ago quarter.

Operating expenses increased 1.2% from the year-ago quarter to $570.4 million much higher than guided figure of $510 million (+/- $5 million). However, as a percentage of revenues operating expense declined 150 bps from the year-ago quarter.

As a result, operating margin expanded 20 bps to 21.8%, which missed management’s guidance of almost 25%.

Cash Flow/Share Buyback

Total cash, cash equivalents, and investments as of Dec 31, 2016 were $3.66 billion, as compared to $3.48 billion as of Sept 30, 2016. Juniper’s net cash flows from operations were $334 million, as compared with $245 million in  third-quarter 2016.

Juniper did not buy any shares in the quarter but paid dividend worth $38 million.

Guidance

Juniper’s outlook for first-quarter 2017 disappointed us. The company anticipates revenues of approximately $1.20 billion (+/- $30 million), which reflects sequential decline. On a year-over-year basis, revenues are expected to improve more than 9%. Management anticipates pricing pressure and product mix fluctuations to continue going forward.

Non-GAAP gross margin is projected to be around 62.5% (+/- 0.5%). The company expects non-GAAP operating expenses of $515 million (+/- $5 million), and non-GAAP operating margin of almost 19.5%. Non-GAAP earnings are expected to range within 38–44 cents per share.

Juniper expects revenues, operating income and earnings per share to grow in 2017, driven by a differentiated product portfolio and growth from emerging technologies. Management expects continued strong cash flow generation and plans to return approximately 50% of free cash flow to shareholders.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.

Juniper Networks, Inc. Price and Consensus

Juniper Networks, Inc. Price and Consensus | Juniper Networks, Inc. Quote

VGM Scores

At this time, Juniper's stock has a subpar Growth Score of 'D', though it is doing a bit better on the momentum front with a 'C'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregte VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable more for value than momentum based on our styles scores.

Outlook

The stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.

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