The Zacks Analyst Blog Highlights:Juniper Networks, AT&T, Cisco Systems, Alcatel-Lucent and Sun Bancorp

Jan 03, 2013, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Jan. 3, 2013 /PRNewswire/ -- announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Juniper Networks Inc. (NYSE: JNPR), AT&T Inc. (NYSE: T), Cisco Systems Inc. (Nasdaq:CSCO), Alcatel-Lucent (NYSE: ALU) and Sun Bancorp Inc. (Nasdaq:SNBC).


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Here are highlights from Wednesday's Analyst Blog:

Juniper Networks: A Strong Buy

On January 1, 2013, Zacks Investment Research upgraded Juniper Networks Inc. (NYSE: JNPR) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

A decent third quarter 2012, rising estimates, planned cost cutting, acquisition of Contrail, and higher spending announced by its customer AT&T Inc. (NYSE: T) are the rank drivers for this stock.

Juniper acquired software-based networking startup Contrail Systems for $176 million in cash in December 2012. Contrail Systems primarily develops software to update and configure networking equipment instead of manually adjusting networking hardware. The acquisition is expected to help Juniper to stand its ground against stiff competition from rivals like Cisco Systems Inc. (Nasdaq:CSCO).

Juniper posted adjusted earnings per share of 14 cents in the third quarter of 2012, above the Zacks Consensus Estimate of 10 cents. Year-over-year revenue growth of 1.1% came on the back of Switching and Services sales, contribution from Europe, as well as Service Providers, which were partially offset by lower Security solutions sales, weak contribution from Enterprises and the Asia-Pacific region.

During the quarter, Juniper announced its plans to reduce 500 positions, which will save roughly $150.0 million in operating expenses annually.

We believe that with operating cost control and acquisition synergies, Juniper will be able to outperform its peers.

For 2012, 9 out of 11 estimates were revised higher over the last 60 days. For 2013, 8 out of the 11 estimates moved upward.

Despite the positive estimate revisions, the Zacks Consensus Estimate for 2012 remained unchanged at 48 cents in the last 60 days. However, the Zacks Consensus Estimate for 2013 went up by a penny to 85 cents in the last 60 days.

Although the Zacks Consensus Estimate did not show much movement, we believe that Juniper has the potential to post a positive earnings surprise in the upcoming quarter. For the past four quarters, Juniper has posted an average surprise of 21.1%.

Other Stocks to Consider

1.    Cisco has a Zacks #2 Rank (Buy)

2.    Alcatel-Lucent (NYSE: ALU) has a Zacks #3 Rank (Hold).

Sun Bancorp a Strong Buy

Upward estimate revisions on the back of strong third quarter results – including an earnings surprise of 200.0% – have helped Sun Bancorp Inc. (Nasdaq:SNBC) achieve a Zacks #1 Rank (Strong Buy) on January 1. With a solid return of 37.2% in the last year, this provider of various commercial and consumer banking services offers an attractive investment opportunity.

The Rank Drivers

Better-than-expected third quarter results, improving credit quality and strong capital ratios are the primary rank drivers for this stock.

Sun Bancorp reported its third quarter results on October 24 with earnings per share of 1 cent, beating the Zacks Consensus Estimate loss of 1 cent by 200.0%, but lagged the year-ago earnings of 3 cents by 66.7%. Higher non-interest income and reduced provision for loan losses were the positives for the quarter.

Non-interest income jumped 65.5% year over year to $9.6 million. Provision for loan losses skidded 17.4% from the year-ago quarter to $1.9 million.

Non-interest expenses, which increased 14.4% on a year-over year basis to $30.9 million and net interest income, that descended 7.3% year over year to $24.3 million, were the dampeners for the quarter. Moreover, net interest margin contracted 20 basis points year over year to 3.41%, mainly due to persistent pressure in the current interest rate environment.

Credit quality continued to exhibit improvement. The allowance for loan losses was 2.12% of gross loans as of September 30, 2012, compared with 2.39% of total loans as of September 30, 2011. Non-performing assets for the quarter were $126.4 million, dipping 10.2% from the prior-year period. Net charge-offs were $4.2 million, down 27.6% year over year.

As of September 30, 2012, Sun Bancorp's total risk-based capital ratio was 14.30%, Tier 1 capital ratio was 12.73% and leverage capital ratio was 10.43%, above the "well-capitalized" regulatory requirements of 10.00%, 6.00% and 5.00%, respectively.

Earnings Estimate Revisions

Over the past 60 days, upward revisions of 3 out of 5 estimates pushed the Zacks Consensus Estimate for 2012 up from loss of 32 cents to 31 cents per share. The Zacks Consensus Estimate for 2013 advanced 50.0% to 3 cents.


On a price-to-book basis, the shares of Sun Bancorp are trading at 1.0x, a 23.0% discount to the peer group average of 1.3x. Given the company's strong fundamentals, the valuation looks reasonable.

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