Varian Medical Systems (VAR) is slated to report its third-quarter fiscal 2011 results on Wednesday, July 27. The company had earlier forecast earnings per share in the range of 80 cents to 83 cents for the quarter. The current Zacks Consensus Estimate for the third quarter is 83 cents, representing an estimated year-over-year increase of 12.7%.
Second Quarter Recap
Second quarter earnings per share of 86 cents beat the Zacks Consensus Estimate by a penny. Revenues were up 11% year over year (up 9% on a constant currency basis) to $648 million, beating the Zacks Consensus Estimate of $640 million. Order backlog rose 11% to $2.2 billion at the end of the reported quarter. Growth was led by increase in net orders for TrueBeam system, Oncology services, X-Ray tubes and panels as well as security systems.
Oncology Systems’ revenues grew 9% year over year to $508 million, boosted by healthy demand for the company’s radiotherapy, brachytherapy and radiosurgery systems. Varian’s X-Ray Products business had a strong quarter with revenues cruising 15% year over year to $118 million aided by some recovery in the global imaging market. Revenues from the Other category increased 20% year over year to $23 million.
Estimate Revision Trend
Agreement
Among the 10 analysts covering the stock, there were no estimate revisions, for the current quarter, over the past week or month. Of the 10 analysts covering the stock, there were again no estimate revisions, for fiscal 2011, over the past 7 or 30 days. The current Zacks Consensus Estimate for fiscal year 2011 is $3.47, reflecting an estimated 17.2% year-over-year growth.
Magnitude
Given the lack of estimate revisions, the magnitude of revision for the third quarter has been static over the last week and month. Estimates for fiscal 2011 have also remained stagnant over the past week and month.
Our Take on Varian
Varian is the world’s leading manufacturer of integrated radiotherapy systems for treating cancer and a premier supplier of X-ray tubes for diagnostic imaging applications. In the radiation oncology market, the company competes head-to-head with Accuray Incorporated (ARAY).
Varian is poised to increase its market share in the radiation oncology market. The company is currently enjoying a healthy demand for its coveted RapidArc and TrueBeam radiotherapy technology. However, uncertainties stemming from health care reform and a still weak hospital capital spending environment across many developed countries, especially in Europe, pose headwinds. We currently have a Neutral long-term rating on Varian supported by a short-term Zacks #3 rank.
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