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Is a Surprise in Store for Juniper (JNPR) in Q2 Earnings?

Juniper Networks Inc. JNPR is set to release second-quarter 2017 earnings on Jul 25. Notably, the company has a mixed record of earnings surprises in the trailing four quarters, with an average positive surprise of 7.43%.

In the last quarter, Juniper reported adjusted reported non-GAAP earnings (including share-based compensation and share-based payroll tax expense) of 34 cents per share, beating the Zacks Consensus Estimate by three cents.

Moreover, the company’s revenues of $1.22 billion surpassed the Zacks Consensus Estimate and its own expectation of $1.20 billion (+/- $30 million). Revenues increased almost 11.2% on a year-over-year basis, beating management’s expectation of 9% increase.

Juniper anticipates revenues of approximately $1.28 billion (+/- $30 million) for second-quarter 2017, reflecting almost 5% growth. This falls within management’s long-term revenue growth expectation of 3–6%.

Non-GAAP gross margin is projected to be around 62.5% (+/- 0.5%). The company expects non-GAAP operating expenses of $500 million (+/- $5 million), and non-GAAP operating margin of almost 23.5%. Non-GAAP earnings are expected to be 54 cents per share (+/- 3 cents).

Impressive first-quarter results and positive second-quarter guidance have helped the company outperform the industry on a year-to-date basis. While the industry lost 0.7%, the stock returned 4.2% over the same time frame.

Let’s see how things are shaping up prior to this announcement.

Factors to Consider

Juniper has seen growing demand and adoption of its Software Defined Secure networks (SDSN) platforms. The recent security enforcement, which enhances security across enterprise networks as well as public and private clouds, has made its SDSN platform even more lucrative.

In the second quarter, CloudSeeds selected Juniper’s Contrail Networking software-defined networking (SDN) solution for its new Infrastructure as a Service (IaaS) data center solutions. Coloclue, an association of network specialists, adopted Juniper’s NVF Solution for building a next generation production network. Most recently, also selected Juniper’s SDSN platform for network security.

We believe that the company’s recent unveiling of Cloud-Grade Networking, which covers telemetry, automation and machine learning processes, will also boost its top line.

Earnings Whispers?

Our proven model does not conclusively show that Juniper is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: Juniper’s Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 42 cents per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Juniper carries a Zacks Rank #3, which when combined with a 0.00% ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Cypress Semiconductor Corporation CY with an Earnings ESP of +11.1% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Lam Research Corporation LRCX with an Earnings ESP of +1.33% and a Zacks Rank #1.

Kemet Corporation KEM with an Earnings ESP of +11.1% and a Zacks Rank #1.

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