When Verizon reported the company’s second-quarter earnings, many analysts that cover telecom equipment makers raced to the data on what second-half capital expenditures (capex) were expected to be. A new report from Cowen notes that the giant carriers’ light first-half spending combined with unchanged total 2015 guidance could be big for the company’s communications equipment suppliers.

In the report, the Cowen team focused on stocks in the firm’s coverage universe that look to benefit from the second-half spending boost. They are careful to caution that the Verizon capex levels for the second half of the year are hardly top secret and are expected by most investors. With that in mind, three of the Cowen stocks are among the suppliers that derive the highest percentage of their total revenue from Verizon.

BroadSoft

This company has been getting solid orders from a number of the big carriers. BroadSoft Inc. (NASDAQ: BSFT) is the leading provider of software and services that enable mobile, fixed-line and cable service providers to offer unified communications over their Internet protocol networks. The company’s core communications platform enables the delivery of a range of enterprise and consumer calling, messaging and collaboration communication services, including private branch exchanges, video calling, text messaging and converged mobile and fixed-line services.

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The Cowen team sees what they have called in prior reports as “network transformation” projects driving near and longer term revenue ahead of the firm’s current and Wall Street forecasts, with eventual operating leverage perhaps starting next year. The company’s voice-over-Internet-protocol (VoIP) services have been in-demand at the carriers and should be able to drive Verizon orders.

The Cowen price target for the stock is $48 and the stock is rated Outperform. The Thomson/First Call consensus price target is $39.75. The stock closed Wednesday at $34.22.
Ciena

This company is a leading maker of fiber optic networking equipment sold to telecom carriers. Ciena Corp. (NYSE: CIEN) is expected to get a large chunk of the Verizon 100 Gbps Dense Wave Division Multiplex Metro optical network build-out. Some Wall Street analysts are thinking the company could see as much as 30% of the total. Some firms think that Verizon could end up being as much as a 10% customer next year, but the Cowen team estimates around 6%.

Ciena leverages its deep expertise in packet and optical networking and distributed software automation to deliver solutions in alignment with its OPn architecture for next-generation networks. The company enables a high-scale, programmable infrastructure that can be controlled and adapted by network-level applications, and provide open interfaces to coordinate computing, storage and network resources in a unified, virtualized environment.

In addition to the Verizon deal, a majority of enterprise and Web/cloud data centers are in the process of running high-speed 40/100G optical interconnects between their data centers. This could also mean added business for Ciena.

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The Cowen price target is set at a monstrous $35. The consensus target is $28.17. Shares closed on Wednesday at $25.14.

Juniper Networks

This is a solid technology stock that has been on a long roller-coaster ride for investors over the past two years. Juniper Networks Inc. (NYSE: JNPR) has seen the combination of positive activist shareholder moves combined with a solid product cycle that has made the stock a recent favorite again, so its trip to the woodshed last year may be just the ticket for investors looking to buy some, despite the big move made off the lows that were printed last fall. The company has a big presence in network and enterprise security and could possibly be a merger or straight out takeover target.

Juniper and Mirantis announced in the spring an expanded engineering partnership that provides customers with a reliable, open-source software-defined networking fabric to deploy OpenStack clouds at scale. According to a recent report by 451 Research, the OpenStack market size is estimated to reach $1.7 billion by 2016. Enterprises and service providers are increasingly looking to open-source software for its increased flexibility, cost savings, no vendor lock-in and the ability to customize integration with other infrastructure and applications.

The Cowen team estimates that Juniper will get as much as 10% of the firm’s total business from Verizon this year, and it is in position to see a very nice share of the routing business for the rest of the year.

Juniper investors are paid a 1.53% dividend. The Cowen price objective for the stock, which is rated Market Perform, is $26, and consensus target is $26.26. The stock closed Wednesday at $26.19.

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While the capex is expected to start pouring out of the giant carrier reasonably quickly in the second half, the Metro network build-out is not expected to get underway until later this year. Either way, these top companies look poised to cash in.

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