Juniper Networks (JNPR) Stock Gaining on Deal Speculation

NEW YORK (TheStreet) -- Shares of Juniper Networks (JNPR) are gaining 4.13% to $28.09 in Wednesday's morning trading after a Sanford C. Bernstein analyst in London said that Swedish telecommunications company Ericsson (ERIC) may look to buy Juniper Networks to counter Nokia (NOK)'s $16.6 billion acquisition of Alcatel Lucent (ALU), Bloomberg reports.

Last month, French global telecommunications company Alcatel-Lucent agreed to be bought by Nokia, a combination that's set to surpass Ericsson in sales. While Ericsson was close to making a bid for Alcatel-Lucent, last year the company walked away.

With Alcatel-Lucent off the table, the natural route would be for Ericsson to buy Juniper Networks, which could help Ericsson "restore old order and avoid being marginalized," the Sanford C. Bernstein analyst said.

Ericsson's CEO Hans Vestberg plans to meet with his top managers next month to discuss a plan on what the Swedish telecommunications company can do to respond to the recent Nokia-Alcatel deal, Bloomberg noted.

TheStreet Ratings team rates JUNIPER NETWORKS INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate JUNIPER NETWORKS INC (JNPR) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins, largely solid financial position with reasonable debt levels by most measures and increase in stock price during the past year. We feel its strengths outweigh the fact that the company has had somewhat disappointing return on equity."

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

  • Net operating cash flow has significantly increased by 74.04% to $219.30 million when compared to the same quarter last year. In addition, JUNIPER NETWORKS INC has also vastly surpassed the industry average cash flow growth rate of -72.79%.
  • The gross profit margin for JUNIPER NETWORKS INC is rather high; currently it is at 66.45%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 7.51% trails the industry average.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • Despite currently having a low debt-to-equity ratio of 0.42, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further. Despite the fact that JNPR's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.53 is high and demonstrates strong liquidity.
  • JUNIPER NETWORKS INC's earnings per share declined by 13.6% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, JUNIPER NETWORKS INC swung to a loss, reporting -$0.90 versus $0.86 in the prior year. This year, the market expects an improvement in earnings ($1.68 versus -$0.90).
  • You can view the full analysis from the report here: JNPR Ratings Report

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