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Can Varian Medical Systems (VAR) Surprise This Earnings Season? - Analyst Blog

Posted: 4/23/2014 5:21:00 PM
Referenced Stocks: AFFX;ALGN;MYGN;VAR

Varian Medical Systems, Inc. ( VAR ) is set to report its second-quarter fiscal 2014 results on April 23, after the market closes. Last quarter, the company had posted a 1.11% positive surprise. Let's see how things are shaping up for this announcement.

Factors at Play

Varian's earnings rose 5.8% year over year to 91 cents per share in the last reported quarter, exceeding the Zacks Consensus Estimate by a penny. Varian's net revenues increased 5% year over year to $711.5 million in the quarter, primarily driven by constant demand for the company's Oncology services and X-Ray imaging components.

In the last reported quarter, while Varian's Oncology gross orders grew in North America, it declined in Asia as a result of softness in both Japan and China.

In Japan, orders dropped significantly due to slower repurchasing activity, negative currency fluctuations and a tough year-ago comparison. In China, first quarter gross orders declined slightly compared to the previous year, because of delays in purchasing decisions. However, management is optimistic about the company gaining share in the Chinese market in the following quarter, with TrueBeam and UNUQUE firmly established in China.

Based on its performance, Varian expects flat revenues in the fiscal second quarter on a year-over-year basis. The company also expects second-quarter earnings to lie in the range of $1.00-$1.04 per share. The Zacks Consensus Estimate of $1.02 lies within the guided range.

Earnings Whispers?

Our proven model does not conclusively show that Varian is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP:   Expected Surprise Prediction or ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. Varian has a Zacks ESP of 0.00%.

Zacks Rank: Varian's Zacks Rank #3 (Hold) when combined with a 0.00% ESP makes surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

Align Technology Inc. ( ALGN ), earnings ESP of +13.89% and a Zacks Rank #1 (Strong Buy)

Myriad Genetics Inc. ( MYGN ), earnings ESP of +10.87% and a Zacks Rank #1 (Strong Buy).

Affymetrix, Inc. ( AFFX ), earnings ESP of +50.00% and a Zacks Rank #2 (Buy).

About Earnings ESP

Would you like to own more stocks likely to beat their next earnings report? And avoid stocks likely to disappoint?

If yes, then it's time you learn about the Earnings ESP score available on

AFFYMETRIX INC (AFFX): Free Stock Analysis Report

ALIGN TECH INC (ALGN): Free Stock Analysis Report

MYRIAD GENETICS (MYGN): Free Stock Analysis Report

VARIAN MEDICAL (VAR): Free Stock Analysis Report

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