Varian Medical Systems ( VAR ) posted
first-quarter fiscal 2013 adjusted (excluding one-time items other
than stock based compensation expense) net earnings of 89 cents per
share, beating the Zacks Consensus Estimate of 86 cents per share
and surpassing the year-ago earnings of 79 cents a share.
Net earnings increased 5.7% year over year to $95.3 million (or
86 cents per share) in the fiscal first quarter. Net earnings
include restructuring charges of $4.1 million.
Revenues & Orders
Revenues in the fiscal first quarter increased 8% year over year
to $678.4 million, beating the Zacks Consensus Estimate of $676
million. Sales were boosted by healthy growth across the company's
Oncology and X-Ray franchises.
Order backlog rose 11% year over year to $2,785.2 million at the
end of the reported quarter. Net orders increased 2.2% year over
year to $619.2 million.
Revenues from Oncology Systems increased 8% year over year to
$524.3 million in the fiscal first quarter. Net orders for the
segment dropped 2% (down 1% in terms of constant currency) to
$476.9 million. Overseas sales contributed to 56% of net orders for
this segment. Net orders were lower 2% in constant currency
Revenues for X-Ray Products segment in the fiscal first quarter
came in at $132.9 million, up 18% year over year. Net orders for
the products spurted 21% to $133.2 million. This segment witnessed
solid growth in orders for both flat panel detectors and X-Ray
tubes, gains in market share and contributions from newer
Revenues from the Other category declined 14.2% from the
comparable year-ago quarter to $21.2 million in the reported
quarter. Net orders for the category also dipped about 21.6% year
over year to $9.1 million.
Gross margin in the quarter was 42.9%, down 10 basis points
(bps) year over year. Operating margin was lower by 30 bps at
Selling, general and administrative expense was 16% of sales in
the reported quarter, up 33 bps. Research and development
expenditure was 7% of revenues, flat year over year.
Varian exited the fiscal first quarter with cash and cash
equivalents and short term investments of $807.3 million, up 27.8%
year over year. Long-term debt (including current maturities) stood
at $6.3 million, flat on a year-over-year basis.
Moving ahead, Varian continues to expect revenues to grow by 8% to
9% for fiscal 2013. Net earnings for fiscal 2013 have been
marginally revised in the band of $4.08 to $4.16 (earlier $4.06 and
$4.16) per share.
For second-quarter fiscal 2013, the company envisions sales to
grow roughly 5% to 6% year over year. Varian expects net earnings
in the range of 98 cents to $1.03 per share, including a
restructuring charge for the second quarter.
Varian is a leading manufacturer of integrated radiotherapy
systems for cancer treatment, 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 Accuray ( ARAY ).
The company is poised to increase its market share in radiation
oncology. It currently enjoys a healthy demand for its coveted
TrueBeam technology, which has meaningfully contributed to its net
order oncology growth. Varian's TrueBeam was designed to treat
tumors with beams of high speed and precision. It incorporates
several technological innovations such as patient positioning and
managing his/her motion. Given its high intensity nature, TrueBeam
can dispense strong dosage over twice as fast as that possible with
Moreover, Varian continues to post decent results despite the
contagion of economic problems in Europe and sustained softness in
certain end markets. It enjoys a strong balance sheet marked by low
debt and sizeable cash. The company also periodically deploys
capital to boost investor confidence via 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.
The stock carries a Zacks Rank #3, which translates into a
short-term Hold rating. Cantel Medical Corp. ( CMN ) and
Cyberonics Inc. ( CYBX ) are Zacks Rank
#1 (Strong Buy) stocks which are expected to do well.ACCURAY INC (ARAY): Free Stock Analysis ReportCANTEL MED CORP (CMN): Free Stock Analysis
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