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Varian (VAR) Earnings and Revenues Surpass Estimates in Q3

Zacks Equity Research

Varian Medical Systems, Inc. VAR reported third-quarter fiscal 2020 adjusted earnings per share (EPS) of 78 cents, beating the Zacks Consensus Estimate of 55 cents by 41.8%. The figure however fell 40.9% year over year.

The company reported revenues of $694.3 million, which beat the consensus mark of $677 million by 2.6%. Revenues fell 15.9% year over year and 15% at constant currency (cc). Organically, revenues fell 19%.

Segment Details

Oncology Systems: Revenues totaled $654 million, down 17% year over year.

 As a whole, gross orders fell 14% from the year-ago quarter to $665 million.

Orders in the United States dropped 8% year over year, which included a 6% decline in North America. In EMEA, orders fell 32% year over year. APAC orders rose 4% year over year.

Proton Solutions: Revenues at the segment rose 6% to $33 million. Per management, this was driven by consistent growth in services revenues.

Other: Revenues at this segment grossed $7 million. 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 $298.5 million, down 15.1% year over year. Gross margin in the reported quarter was 42.9% of net revenues, up 44 basis points (bps).

Adjusted operating profit came at $88 million, down 35% year over year.As a percentage of revenues, adjusted operating margin was 12.7%, down 373 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 and EPS Surprise

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

Guidance

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

Our Take

Varian exited the fiscal third quarter on a strong note. Proton Solutions unit saw revenue growth in the quarter. 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 five Ethos orders in the United States and two in Europe (the total orders reaching 38 units since launch) buoys optimism.

Moreover, the company’s collaboration with Siemens Healthineers will enable Varian to expand its renowned customer care, thereby offering service to clinicians and patients from the very first stage in the battle against cancer. This development instills optimism in the stock.

On the flip side, the company saw revenue decline from its core Oncology Systems 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 in the broader medical space are Thermo Fisher Scientific Inc. TMO, PerkinElmer, Inc. PKI and OPKO Health, Inc. OPK. While PerkinElmer sports a Zacks Rank #1 (Strong Buy), the other two have a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Thermo Fisher reported second-quarter 2020 adjusted EPS of $3.89, beating the Zacks Consensus Estimate by 45.7%. Revenues of $6.92 billion outpaced the consensus mark by 0.1%.

PerkinElmer reported second-quarter 2020 adjusted EPS of $1.57, surpassing the Zacks Consensus Estimate by 68.8%. Revenues of $811.7 million outpaced the consensus mark by 1.3%.

OPKO Health reported second-quarter 2020 EPS of 5 cents against the Zacks Consensus Estimate of a loss of 7 cents per share. Revenues of $301.2 million surpassed the consensus estimate by 28.4%.

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