Varian Medical Systems
) is slated to report fiscal third-quarter 2012 results on
Wednesday, April 25. The current Zacks Consensus Estimate for the
third quarter is 93 cents, representing an estimated year-over-year
increase of 12.3%.
Second Quarter Recap
Varian reported second quarter earnings per share from
continuing operations of 96 cents, matching the Zacks Consensus
Estimate while surpassing the corresponding year-ago earnings of 86
cents. Net earnings for the quarter rose 4.6% year over year to
$107.8 million (or 94 cents a share).
Varian's top line witnessed an 11% increase to $720 million in
the quarter and beat the Zacks Consensus Estimate of $700 million.
Order backlog increased 18% to $2.7 billion at the end of the
reported quarter. Growth was led by increase in demand for newer
products of both Oncology Systems and X-Ray segments.
Oncology Systems' revenues grew 11% year over year to $565
million. Varian benefited from strong demand for its TrueBeam
Varian's X-Ray Products business had a moderate quarter with
revenues moving up 4% year over year to $123 million. Sales in the
"Other" category spiked 39.1% year over year to $32 million.
Estimate Revision Trend
Among the 11 analysts covering the stock, there were no estimate
revisions, for the current quarter, over the past week. There was
one estimate revision (in the downward direction), for the current
quarter, over the prior month.
There were no estimate revisions (among 11 analysts), for the
current fiscal year, over the preceding week. There was one upward
revision and two cases of downward revision, for the current fiscal
year, over the past month.
The current Zacks Consensus Estimate for fiscal year 2012 is
$3.79, reflecting an estimated 10.28% year-over-year growth.
Given the relative shortage of estimate revisions, the magnitude
of revision for the fiscal third quarter has been static over the
last week and month. Estimates for fiscal 2012 have remained
stagnant over the past week and dipped by a penny in the past
Varian has produced a positive surprise in one of the previous
four quarters while it trailed estimates in another quarter. We
expect that a similar mixed trend might continue. The company
produced an average earnings surprise of 0.95% over the prior four
quarters, meaning that it beat the Zacks Consensus Estimate by that
Varian is a leading manufacturer of integrated radiotherapy
systems for treating cancer and a premier supplier of X-ray tubes
for diagnostic imaging applications. The company operates in a
technology-driven environment where success depends on the use of
new technology, product development and upgrades. In the radiation
oncology market, Varian competes with
Varian is poised to increase its market share in radiation
oncology. It is currently enjoying a healthy demand for its coveted
TrueBeam technology, which is meaningfully contributing to its net
order oncology growth. Moreover, Varian enjoys a strong balance
sheet marked by minimal debt and sizeable cash. The company uses a
part of its healthy cash flows for share repurchases.
However, Varian competes with larger players in a
technology-intensive industry. Further, uncertainties stemming from
health care reform and a still weak hospital capital spending
environment across many developed countries, especially in Europe,
are significant challenges. We currently have a Neutral long-term
rating on Varian supported by a short-term Zacks #3 Rank
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