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Varian (VAR) Earnings and Revenues Surpass Estimates in Q4

Varian Medical Systems, Inc. VAR reported fourth-quarter fiscal 2020 adjusted earnings per share (EPS) of $1.12, beating the Zacks Consensus Estimate of 98 cents by 14.3%. The figure however fell 7.4% year over year.

For fiscal 2020, adjusted EPS came at $3.91, beating the Zacks Consensus Estimate of $3.77 by 3.7%. Moreover, the bottom line fell 15.6% year over year.

Revenue Details

The company reported revenues of $850.5 million, which beat the consensus mark of $832 million by 2.2%. However, revenues fell 3.2% year over year and 4% at constant currency (cc).

For fiscal 2020, the company reported revenues of $3.17 billion, which beat the consensus mark of $3.15 billion by 0.6%. Revenues fell 2% year over year and 1% at constant currency (cc).Organically it fell 4%.

Segment Details

Oncology Systems: Revenues totaled $800.4 million, down 2.3% year over year.

 As a whole, gross orders fell 8% from the year-ago quarter to $1 billion.

Orders in the United States dropped 19% year over year, which included a 17% decline in North America. In EMEA, orders fell 4% year over year, while APAC orders rose 14% year over year.

Proton Solutions: Revenues at the segment fell 8.1% to $38.5 million.

Other: Revenues at this segment grossed $12million, down 33%. For investors’ notice, the segment comprises Interventional Solutions business, including cryoablation, embolic microspheres, and microwave ablation. Moreover, it comprises investments in cardiac radioablation.

Margins

Total gross profit in the reported quarter was $375 million, down 2.6% year over year. Gross margin in the reported quarter was 44.1% of net revenues, up 30 basis points (bps).

Adjusted operating profit came in at $123 million, down 10.7% year over year.As a percentage of revenues, adjusted operating margin was 14.5%, down 122 bps.

Varian Medical Systems, Inc. Price, Consensus and EPS Surprise

 

Varian Medical Systems, Inc. Price, Consensus and EPS Surprise

Varian Medical Systems, Inc. price-consensus-eps-surprise-chart | Varian Medical Systems, Inc. Quote

Cash Position

The company exited fiscal 2020 with $766.1 million in cash and cash equivalents, compared with $531.4 million in the year-ago period. Cumulative net cash provided by operating activities at the end of fiscal 2020 was $266 million compared with $117.8 million in the year-ago period.

Guidance

In the quarter under review, the company did not issue any guidance due to the continued uncertainty surrounding the magnitude and duration of the COVID-19 pandemic.

Our Take

Varian exited fiscal 2020 on a strong note. Expansion in gross margin is an added positive. Management is optimistic about the completed acquisitions of CyberHeart, Cancer Treatment Services International, Endocare and Alicon. The receipt of 10 Ethos orders (including five in North America and five in EMEA) and one Proton order buoys optimism. Moreover, the company’s merger agreement with Siemens Healthineers will enable it to expand its renowned customer care, thereby offering service to clinicians and patients from the very first stage of cancer. This development instills optimism in the stock.

On the flip side, the company saw revenue decline at each of its core operating segment in the quarter. Oncology gross orders also fell in the quarter, especially in EMEA. Contraction in adjusted operating margin is concerning.

Zacks Rank and Key Picks

Varian currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks yet to report earnings include Insulet Corporation PODDIDEXX Laboratories, Inc. IDXX and Quidel Corporation QDEL.

The Zacks Consensus Estimate for Insulet’s third-quarter 2020 adjusted EPS is currently pegged at 6 cents and for revenues is at $220.89 million. The company currently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

IDEXX currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its third-quarter 2020 adjusted EPS is currently pegged at $1.41. The same for revenues stands at $666.7 million.

The Zacks Consensus Estimate for Quidel’s third-quarter 2020 revenues is pegged at $476.1 million, suggesting a year-over-year improvement of 276.4%. The same for EPS stands at $4.58, indicating growth of 554.3% from the year-ago reported figure. The company currently sports a Zacks Rank #1.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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