Varian Medical Systems Inc. Earnings: Revenue and Profits Rise

S&P 500 (NYSE:SPY) component Varian Medical Systems Inc. (NYSE:VAR) reported higher profit for the first quarter as revenue showed growth. Varian Medical Systems manufactures, designs, services and sells equipment and software products for treating cancer with radiotherapy, stereotactic radiosurgery and brachytherapy.

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Varian Medical Systems Earnings Cheat Sheet for the First Quarter

Results: Net income for the medical appliances and equipment company rose to $902 million (79 cents per share) vs. $96.5 million (80 cents per share) in the same quarter a year earlier. This marks a substantial increase from the year earlier quarter.

Revenue: Rose 978.4% to $6.25 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: VAR beat the mean analyst estimate of 76 cents per share. It beat the average revenue estimate of $633.3 million.

Quoting Management: “While we met our guidance for net earnings and revenues, this was a challenging quarter for the company in a variety of ways,” said Tim Guertin, president and CEO of Varian Medical Systems. “We experienced order push outs in our North American oncology business and X-Ray Product orders and sales were hurt by inventory adjustments by our customers in Japan. As anticipated, the gross margin was impacted by a tough year-ago comparison, product mix, and accounting for Scripps proton revenue with zero margin. Additionally our operating margin was impacted by the dilutive effects of the Calypso acquisition.”

Key Stats:

Gross margin shrank three percentage points to 43%. The contraction appeared to be driven by increased costs, which rose 1038.9% from the year earlier quarter while revenue rose 978.4%.

Revenue has risen the past four quarters. Revenue increased 10.3% to $718.9 million in the fourth quarter of the last fiscal year. The figure rose 12.3% in the third quarter of the last fiscal year from the year earlier and climbed 10.7% in the second quarter of the last fiscal year from the year-ago quarter.

The company topped expectations last quarter after falling short of forecasts in the fourth quarter of the last fiscal year with net income of 95 cents versus a mean estimate of net income of 97 cents per share.

Net income has increased more than twofold year over year on average across the last five quarters. The biggest gain came in the most recent quarter, when income climbed 834.8% from the year earlier quarter.

Looking Forward: Analysts appear increasingly optimistic about the company’s results for the next quarter. The average estimate for the second quarter has moved up from 99 cents a share to $1 over the last ninety days. At $3.96 per share, the average estimate for the fiscal year has fallen from $3.98 ninety days ago.

Competitors to Watch: Accuray Incorporated (NASDAQ:ARAY), TomoTherapy Incorporated (NASDAQ:TOMO), North American Scientific, Inc. (NASMQ), Hologic, Inc. (NASDAQ:HOLX), Theragenics Corporation (NYSE:TGX), BSD Medical Corporation (NASDAQ:BSDM), iCAD, INC. (NASDAQ:ICAD), IsoRay, Inc. (AMEX:ISR), and General Electric Company (NYSE:GE).

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(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

To contact the reporter on this story: Derek Hoffman at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com