Juniper Networks Isn’t Exciting But It Is A Steady Dividend Payer
Juniper Networks (NYSE:JNPR) isn’t an exciting company compared to say an Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), or even Nvidia (NASDAQ:NVDA) and AMD (NASDAQ:AMD). It’s a maker of networking equipment, routers, edge, and cloud-computing equipment with a growing side-business in services. What it is, where those others aren’t, is a high-yield dividend payer with a healthy and steady business. This stock may not deliver the capital gains you’ll see with the next hot new growth story but it will deliver growth over the coming years, and pay a nice dividend while it does.
Juniper Networks Rebounds In The 3rd Quarter
Juniper Networks put in a solid performance in the 3rd quarter. Revenue rebound 5% on a sequential basis to $1.13 billion or up $0.01 billion from last year. Results were driven by strength in both the products and services segments although services growth was more substantial. In terms of the gross, products are about 65% of the business, the higher-margin services 35%.
Margins rebound along with the revenue hitting 17.1% for the quarter. This is up nearly 300 basis points from the previous quarter but down from last year’s 18.3%. On the bottom line, earnings are a bit of a mixed picture but nonetheless good. At the GAAP level EPS of $0.43 beat by $0.12, at the adjusted level EPS of $0.43 was in-line with the consensus.
In terms of growth, adjusted eps fell slightly from the previous year but that can be explained by larger-than-expected accounts receivable. The number of days sales outstanding in accounts grew 17.6% YOY. When adjusted for that short-fall in cash flow earnings are much better and that is seen in the GAAP EPS. GAAP EPS is up 138% from the previous quarter and 46% from last year. Looking forward, the company expects 4th quarter revenue and EPS in the range of $1.14 billion to $1.24 billion and $0.48 to $0.48 for modest sequential and flat to modest YOY growth. The consensus is very near the midpoint of both ranges.
“We experienced better than expected demand during the September quarter, as our teams continued to execute extremely well, despite the various challenges created by the pandemic,” said Juniper’s CEO, Rami Rahim. “I am encouraged by the business momentum we are seeing, particularly in our enterprise and service provider verticals. Given the strength of our current portfolio and the investments we have made in our go-to-market organization, I am confident not only in our Q4 outlook, but our ability to deliver organic growth in 2021.”
Juniper Is A High-Yield Value
Juniper Networks is trading a relatively low valuation considering the health of the business and the dividend. Trading at 14X this year’s and only 12.75X next year’s earnings the company is well below the S&P 500’s 21X along with its lesser-yielding peers. The yield is near 3.65% with shares trading at $21 which is more than double the S&P average and it comes with a better outlook for growth.
The company has a payout ratio near 50% which is more than manageable give the low debt, high-cash/free-cash-flow nature of the balance sheet. The company’s cash position did come down a bit over the last year but that too can be explained away by the accounts receivable. The bottom line is that this payment is safe and that safety is backed up by the numbers. Oh, and the company just made its 4th quarter declaration, the stock goes ex-dividend on 11/30.
The Technical Outlook: Juniper Falls 4.5% On Earnings News
Shares of Juniper did not respond to the earnings news favorably. Price action is down more than 4.0% in early trading and looks like it will go lower. That’s not good news for those holding the stock I know, but it is great news for anyone looking to purchase more (or some). In the near-term, it looks like JNPR could fall as far another 3% to 5% before hitting a firm support target. If price action falls below the $20 level a move to retest the March lows could be coming, as irrational as it seems. In either case, be ready to buy when price action confirms a bottom because the long-term outlook is pretty good.
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