Varian Beats Estimates, Profit Up - Analyst Blog
January 24 2013 - 3:30AM
Zacks
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.
Segment Review
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 ex-U.S.
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 products.
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.
Margins
Gross margin in the quarter was
42.9%, down 10 basis points (bps) year over year. Operating margin
was lower by 30 bps at 20.3%.
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.
Balance Sheet
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.
Outlook
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 earlier equipment.
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 Report
CANTEL MED CORP (CMN): Free Stock Analysis Report
CYBERONICS INC (CYBX): Free Stock Analysis Report
VARIAN MEDICAL (VAR): Free Stock Analysis Report
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