Enterprise networking provider Juniper Networks (JNPR +0.00%) was undoubtedly glad to put the month of October in the rearview mirror. The upside of Juniper's nearly 11% share price decline last month is that it's become an even better value. Trading at just 15.2 times earnings, Juniper is valued at less than half of Intel's (INTC 3.03%) average of 34 times earnings, though its 1.6% dividend yield is below its peer's 2.3%.
Intel also offers investors good value, at just 16.2 times earnings, considering its peer average valuation is 26.5 times earnings. And at 2.3%, Intel handily beats its peer average dividend yield of 1.8%. It's been a long time coming, but after last quarter, Intel has regained investor confidence, yet still remains a great value.
Image source: Getty Images.
Late to the party
Juniper's downward spiral began with lowering its third-quarter guidance ahead of its earnings report. Rather than the $1.32 billion in revenue Juniper CEO Rami Rahim initially forecast, the updated top line was cut to $1.255 billion. The lower guidance was the result of the "timing of switching deployments" falling behind schedule.
Though Juniper's $1.258 billion -- a 2% gain -- was in line with the revised forecast, the product deployment concerns could last well into next year, as per its earnings call. Considering quarterly cloud sales declined 4% to $344.9 million, Juniper's plans to disrupt the market are effectively on hold. Juniper's scrambling to find a place in the cloud should have begun long ago, as Intel's transition did.
When CEO Brian Krzanich took the helm at Intel in May of 2013, he immediately implemented a shift away from a reliance on PCs. Intel's new focus was, and remains, on cloud data centers, the Internet of Things (IoT), artificial intelligence, and other fast-growing markets. Intel's decision to dive into cutting-edge technologies early is paying off in 2017.
After another record quarter announced Oct. 26, Intel is clearly reaping the rewards of getting a relatively early start in its transformation, which is one reason it's a better value stock than Juniper.
Image source: Intel.
Delivering the goods
As Juniper struggles with developing and ultimately selling its new-ish cloud solutions, Intel's already navigated those waters, and it shows. Although its 6% jump in total revenue to $16.1 billion wasn't a record, as the prior two quarters were, Intel did report a 15% improvement in operating income to a record-breaking $5.12 billion.
Given its strong operating income, not surprisingly, Intel set another all-time high with an astounding 36% jump in earnings per share (EPS) to $0.94. For some perspective, Juniper's $0.46 a share last quarter was a 2% increase compared to a year ago. While Juniper battles its product deployment demons, Intel has put together a string of record-breaking quarters due to its next-gen units.
To its credit, Juniper's service sales did rise 9% to $388.1 million last quarter, overcoming its drop in product sales. But with such a low sales base to begin with, I'd expect Juniper to report larger jumps in revenue at this early stage for the service unit.
Intel surely didn't disappoint where it counts. Memory group revenue rose 37% to $891 million, IoT sales climbed 23% to $849 million, and programmable solutions -- a key component of IoT-related offerings -- jumped 10% to 469 million. Intel's data center sales improved 7% to $4.9 billion.
Less is more
Both Juniper and Intel are focused on becoming more efficiently run companies, but again, it's Intel that's delivering. Juniper pared just 4% off its operating expenses, and it now intends to "realign" its workforce -- which is CEO-speak for cutting jobs -- to shave even more overhead.
Last quarter, Intel's operating expenses declined 10% year over year, which was one reason its operating income and EPS were so strong. Juniper's job-cutting plans will help, eventually. But realigning its workforce to reduce overhead, let alone overcoming delays that are impacting Juniper's primary growth driver, is going to take a while.
The early start to transforming its business, delivering outstanding results where it counts, all while becoming a leaner, meaner company, are why Intel is the better value stock.
