Juniper's ( JNPR) outlook gives the networking sector an all-clear sign.

The Sunnyvale, Calif., tech shop on Thursday blew past fourth-quarter targets and raised guidance for the quarter and year ahead. The report helped quiet concerns that demand for new Internet gear was tightening as a slowing economy looms.

Shares of Juniper were climbing 94 cents, or 3.6%, to $27.24 Friday. Top rival Cisco ( CSCO) added 41 cents, or 1.6%, to $25.52.

On a conference call with analysts Thursday, Juniper said it had confidence in its upbeat forecast due to good visibility in the market. The outlook suggested that there were no cautious cutbacks in orders for the sort of high-capacity equipment to help phone companies handle higher traffic volumes.

This is "a recurring theme we've heard now from nearly every carrier-focused high-end telecom equipment maker," JPMorgan analyst Ehud Gelblum wrote in a note Friday.

Gelblum prefers Cisco in this two-player race. He points out that the valuation gap between Cisco and Juniper is near a two-year high, with Wall Street undervaluing Cisco relative to Juniper's surging price.

Comparing the multiples, or the price of the stock divided by the projected earnings per share for 2008, Gelblum has Cisco at a price-to-earnings ratio of 14.8 to Juniper's 23.3. In other words, if Cisco reports strong results and a solid outlook next month, its stock may have higher to go, Gelblum believes.

The Juniper case, however, doesn't necessarily apply to some of the other gear peers like Alcatel Lucent ( ALU) and Nortel ( NT). While those companies sell new-generation equipment to telcos, a dwindling demand for old-line gear weighs on the overall performance of the supply giants.

For the fourth quarter, Juniper posted adjusted earnings of 27 cents a share, up from the 19-cent comparable profit in the year-earlier quarter. The results beat analysts' average estimate by 3 cents.

Sales for the quarter jumped 36% to $809.2 million from $595.8 million the prior year. That top line exceeded analysts' target calling for sales of $786 million.

For the year, Juniper posted adjusted net income of $504 million, or 87 cents a share, up from $440.4 million, or 73 cents a share, in 2006. Sales for 2007 climbed 23% to $2.8 billion.

For the first quarter, Juniper expects to post an adjusted profit of around 24 cents to 25 cents a share on sales of $815 million. Wall Street predicts a profit of 24 cents a share, with sales of $798 million in sales.

Juniper anticipates 2008 earnings of roughly $1.08 and $1.13 per share and sales of $3.4 billion to $3.55 billion. Analysts project a profit of $1.11 a share on sales of $3.42 billion.

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