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Why Juniper Networks (JNPR) Is Up Today

NEW YORK (TheStreet) -- Juniper Networks (JNPR) rose 7.8% Friday after activist investment firm Jana announced it now has a larger stake in the network equipment company.

The hedge fund is now one of the largest stakeholders in Juniper. In a letter to its investors, Jana said it acquired the stake in the fourth quarter, according to the Wall Street Journal. The letter doesn't, however, disclose the size of Jana's stake in Juniper.

In the letter Jana said it believes Juniper had a market value of $13.1 billion. The hedge fund also says the company should cut about $300 million in costs a year and return some capital to shareholders. The letter does not, however, say how much capital Jana believes the Juniper should return.

TheStreet Ratings team rates JUNIPER NETWORKS INC as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate JUNIPER NETWORKS INC (JNPR) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Communications Equipment industry. The net income increased by 489.4% when compared to the same quarter one year prior, rising from $16.81 million to $99.10 million.
  • JNPR's revenue growth trails the industry average of 22.4%. Since the same quarter one year prior, revenues slightly increased by 6.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
  • The gross profit margin for JUNIPER NETWORKS INC is rather high; currently it is at 66.88%. Regardless of JNPR's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, JNPR's net profit margin of 8.35% is significantly lower than the industry average.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Communications Equipment industry and the overall market, JUNIPER NETWORKS INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.

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