Juniper Network’s stock falls as it warns of elevated supply costs

Shares of the computer networking gear supplier Juniper Networks Inc. slipped more than 5% today after the company warned investors it faces “elevated costs” this year resulting from ongoing supply chain challenges.

The warning came after a mixed report that saw Juniper miss expectations on earnings.

The company reported first-quarter earnings before certain costs such as stock compensation of 31 cents per share on revenue of $1.17 billion, up 9% from a year ago. Net income for the period came to $55.7 million, contrasting with a $31.1 million loss one year ago.

Wall Street had been looking for Juniper to report earnings of 32 cents per share on slightly lower revenue of $1.16 billion. Investors were clearly looking for better news, though, as Juniper’s stock lost almost 6% of its value in the extended trading session, having already slipped 3% earlier in the day.

Juniper sells computer networking hardware such as routers and Ethernet switches. It’s also a leader in the network software business and offers many security tools as well.

Juniper Chief Executive Rami Rahim (pictured) tried to put a brave face on, telling investors in a statement that the company’s business momentum exceeded expectations during the quarter with “solid double-digit order growth” across all customer vertical industries.

“While some of this strength speaks to the health of our markets, much of this demand can be attributed to strong execution across our product management, engineering and go-to-market organizations,” Rahim said. “We believe the technical differentiation of our customer solutions should position us to benefit from the various industry tailwinds that are likely to increase demand for network infrastructure in the years to come.”

What really set the cat among the pigeons, though, was Juniper’s warning of the problems it’s expecting due to ongoing supply chain disruptions. “Similar to others, we are experiencing ongoing supply-chain challenges, which have resulted in extended lead times, as well as elevated logistics and component costs,” the company said in a statement.

Juniper therefore issued cautious guidance for the next three months. The company said it expects second-quarter earnings in a range of 40 to 50 cents per share, the midpoint of which is just below Wall Street’s forecast of 46 cents per share. For revenue, Juniper is forecasting between $1.21 billion and $1.31 billion, which is more or less in line with Wall Street’s expected $1.25 billion.

While investors gave Juniper short shrift, analysts had a more measured opinion of the company’s performance and prospects. Holger Mueller of Constellation Research Inc. told SiliconANGLE that the company showed great execution to hit its guidance in the quarter just gone. “It was a remarkable feat given the challenges the networking industry has faced with regards to semiconductors and overall supply chains,” Mueller said.

Looking ahead, Mueller said Juniper will once again be hard-pressed to meet its guidance, but he didn’t rule it out. “Juniper has set the standard for the rest of the industry in terms of cost discipline and its ability to deliver on its targets,” the analyst continued. “If there is one thing not to like, it’s that the company has slightly reduced its R&D investment, most likely to compensate for the increased costs.”

Photo: SiliconANGLE