Juniper Q3 Tops Estimates

The Juniper Networks Inc. (Nasdaq: JNPR) machine continues to roll, as the company again beat analyst expectations with its earnings report this afternoon.

For its third quarter, which ended in September, Juniper reported profits of $48.8 million, or 9 cents per share, on revenues of $375 million, compared with profits of $7.2 million, 2 cents per share, on revenues of $172 million for the same quarter last year.

The numbers are a reprise of Juniper's pleasant surprise last quarter, when it blew away analysts' forecasts with a loss of $12.6 million, 2 cents per share, on revenues of $307 million (see Juniper Surprises With Q2). They also stand out in this season, considering the number of companies that have already said their earnings will disappoint (see Down Day for Cable Guys, Earnings Warning Turns Redback Blue, and Avici Target out of Reach ).

[All those figures were tallied according to generally accepted accounting principles (GAAP). In non-GAAP figuring, Juniper recorded a third-quarter profit of $73.5 million, or 13 cents per share, exceeding analysts' expectations of 11 cents per share, according to Reuters Research.]

But the good news apparently wasn't good enough for investors, as Juniper shares sold off sharply in after-hours trading, dropping $1.48 (5.91 percent) to $23.55.

So why did the stock fall? The security business, acquired with NetScreen Technoloiges in April, slipped to $90 million, as compared to $94 million in the second quarter (the company reported $100 million back then, but $6 million got deferred into the third quarter). Officials said revenues fell due to the distraction of the NetScreen integration, which included surveying and retooling some business processes.

Juniper is also trading at stratospheric levels – a price-to-earnings ratio of 230 – which might have inflated investors' hopes for an even bigger earnings surprise. "It's one of those situations where a high multiple won't allow for anything less than perfection," said Mark Sue, an analyst with RBC Capital Markets. "The quarter was good, but the tape is skittish these days."

Juniper CEO Scott Kriens led folks on the call to believe that Juniper would enjoy a bounty of telecom spending going forward, while competitors would fall on hard times.

"On the call in July, we discussed that the industry will recover selectively and that the recovery will not be enjoyed by all – and this is proving to be the case," said Kriens. "I doubt that we have heard the last of the bad news from some of these companies."

Juniper even raised guidance for the fourth quarter, predicting revenues of $405 million to $415 million with non-GAAP profits of 14 cents per share. "This is a wider range than usual, given it is difficult to predict the impact of Q4 seasonality," said CFO Marcel Gani.

— Craig Matsumoto, Senior Editor, Light Reading

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