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Varian Medical (VAR) Beats Q2 Earnings & Revenue Estimates
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Maintaining its streak of positive earnings surprises, Varian Medical Systems, Inc. reported second-quarter fiscal 2018 adjusted earnings of $1.15 per share, which beat the Zacks Consensus Estimate of $1.06. Adjusted earnings improved 27.8% on a year-over-year basis.
Revenues totaled $729.9 million, which beat the Zacks Consensus Estimate of $659.6 million. On a year-over-year basis, revenues rose 10.1% or 6% at cc. The company strengthened its foothold in the radiation therapy as the market grew 3% on an order basis in the trailing 12 months.
Varian has a Zacks Rank #2 (Buy). The company has outperformed its industry in a year’s time. The stock has returned 28.4%, comparing favorably with the industry’s rise of 10.7%.
Let’s delve deeper in the company’s quarterly results.
Segment Details
Oncology Systems
In the second quarter, oncology revenues totaled $698 million, up 6% at cc on a year-over-year basis. Varian Medical’s worldwide net installed base is 7,954 units, up 3% or 263 units on a year-over-year basis.
As a whole, gross orders were $664 million, up 1% from the year-ago quarter at cc.
Gross orders in Americas inched up 1% on a year-over-year basis at cc. In EMEA, gross orders were flat year over year. In APAC, gross orders inched up 1% year over year.
Operating earnings in the segment rose 16% year over year.
In February, Varian Medical acquired a small privately-held quality assurance software company, Mobius Medical Systems. Per management, Mobius' market leading software — Mobius3D and DoseLab — are solid enhancements to Varian Medical’s existing portfolio of patient treatment plan QA and machine QA technologies.
Strong performance in the Software, Hardware and Service revenues boosted Varian Medical’s oncology systems in the second quarter.
Particle Therapy
Revenues in this segment inched up 2% on a year-over-year basis to $32 million.
Notably, the company did not book any new ProBeam orders in the quarter.
In March, Varian Medical announced the first patient treatment at the St. Petersburg Proton Therapy Center in Russia, an important step in expanding access to proton therapy around the world.
In the second quarter, the Halcyon platform witnessed 81 total orders since its inception in 2017, with majority from greenfield sites. This reflects solid demand for the platform in the quarters ahead. The projected growth will be driven by solid new-scaled configurations optimized for different customer segments and with advanced capabilities.
Margins
Total company gross profit in the reported quarter was $318.5 million, up 15.6% year over year. Gross margin in the reported quarter is 43.6%, which expanded 200 basis points (bps) on a year-over-year basis.
Oncology gross margin in the reported quarter was 45.7% as a percentage of revenues, up 168 bps. This is primarily driven by revenue growth across hardware, software and services as well as margin rate expansion in Europe from pricing discipline and ongoing operational excellence.
Financial Condition
The company ended the quarter with cash and cash equivalents of $740 million and debt of $255 million.
Cash flow from operations was $66 million, up 104% year over year, driven by operating income performance and working capital efficiencies.
Guidance
Revenue growth is expected in the range of 6-9% on a year-over-year basis for fiscal 2018. The Zacks Consensus Estimate of revenues is pegged at $2.78 billion at the moment.
Adjusted operating earnings, as a percentage of revenues, is expected in the range of 18-19%.
Adjusted earnings per share is expected in the range of $4.43-$4.53. The Zacks Consensus Estimate of earnings is pegged at $4.33 at the moment.
Cash flow from operations is expected in the range of $475-$550 million for 2018.
In Conclusion
Varian Medical ended the second quarter on a solid note, with the Halcyon platform driving the top line.
Solid revenues from Oncology, growing adoption of Particle Therapy and strong overseas presence, particularly in the emerging countries are positives.
Varian Medical signed an agreement to acquire Sirtex, an Australian-based company focused on interventional oncology therapies for approximately AUD 1.6 billion. In Varian 360 Oncology care management platform, the company acquired Evinance Innovation, a small, privately-held Montreal-based company specializing in clinical decision support software.
A solid guidance for fiscal 2018 instills confidence in the stock.
On the flip side, the company did not book any new orders in the Proton Therapy unit. The company competes with large electronic companies as well as smaller and more specialized radiation therapy equipment manufacturers. Thus, competition is likely to mar revenues.
Q1 Earnings of MedTech Majors at a Glance
A few other top-ranked stocks in the medical space, which reported impressive results this earnings season, are Laboratory Corporation of America Holdings (LH - Free Report) , Chemed Corp. (CHE - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) . While Intuitive Surgical sports a Zacks Rank #1 (Strong Buy), LabCorp and Chemed carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
LabCorp reported first-quarter 2018 adjusted earnings per share of $2.78, beating the Zacks Consensus Estimate by 5.3%. Revenues came in at $2.85 billion, exceeding the Zacks Consensus Estimate of $2.78 billion.
Chemed posted first-quarter 2018 adjusted earnings per share of $2.72, surpassing the Zacks Consensus Estimate of $2.37. Revenues came in at $439.2 million, beating the Zacks Consensus Estimate of $420 million.
Intuitive Surgical reported first-quarter 2018 adjusted earnings of $2.44 per share, which beat the Zacks Consensus Estimate by 22.6%. Revenues totaled $848 million, also surpassing the Zacks Consensus Estimate by 10.6%.
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Varian Medical (VAR) Beats Q2 Earnings & Revenue Estimates
Maintaining its streak of positive earnings surprises, Varian Medical Systems, Inc. reported second-quarter fiscal 2018 adjusted earnings of $1.15 per share, which beat the Zacks Consensus Estimate of $1.06. Adjusted earnings improved 27.8% on a year-over-year basis.
Revenues totaled $729.9 million, which beat the Zacks Consensus Estimate of $659.6 million. On a year-over-year basis, revenues rose 10.1% or 6% at cc. The company strengthened its foothold in the radiation therapy as the market grew 3% on an order basis in the trailing 12 months.
Varian has a Zacks Rank #2 (Buy). The company has outperformed its industry in a year’s time. The stock has returned 28.4%, comparing favorably with the industry’s rise of 10.7%.
Let’s delve deeper in the company’s quarterly results.
Segment Details
Oncology Systems
In the second quarter, oncology revenues totaled $698 million, up 6% at cc on a year-over-year basis. Varian Medical’s worldwide net installed base is 7,954 units, up 3% or 263 units on a year-over-year basis.
As a whole, gross orders were $664 million, up 1% from the year-ago quarter at cc.
Gross orders in Americas inched up 1% on a year-over-year basis at cc. In EMEA, gross orders were flat year over year. In APAC, gross orders inched up 1% year over year.
Operating earnings in the segment rose 16% year over year.
In February, Varian Medical acquired a small privately-held quality assurance software company, Mobius Medical Systems. Per management, Mobius' market leading software — Mobius3D and DoseLab — are solid enhancements to Varian Medical’s existing portfolio of patient treatment plan QA and machine QA technologies.
Strong performance in the Software, Hardware and Service revenues boosted Varian Medical’s oncology systems in the second quarter.
Particle Therapy
Revenues in this segment inched up 2% on a year-over-year basis to $32 million.
Notably, the company did not book any new ProBeam orders in the quarter.
In March, Varian Medical announced the first patient treatment at the St. Petersburg Proton Therapy Center in Russia, an important step in expanding access to proton therapy around the world.
Varian Medical Systems, Inc. Price and Consensus
Varian Medical Systems, Inc. Price and Consensus | Varian Medical Systems, Inc. Quote
Halcyon Drive Revenues
In the second quarter, the Halcyon platform witnessed 81 total orders since its inception in 2017, with majority from greenfield sites. This reflects solid demand for the platform in the quarters ahead. The projected growth will be driven by solid new-scaled configurations optimized for different customer segments and with advanced capabilities.
Margins
Total company gross profit in the reported quarter was $318.5 million, up 15.6% year over year. Gross margin in the reported quarter is 43.6%, which expanded 200 basis points (bps) on a year-over-year basis.
Oncology gross margin in the reported quarter was 45.7% as a percentage of revenues, up 168 bps. This is primarily driven by revenue growth across hardware, software and services as well as margin rate expansion in Europe from pricing discipline and ongoing operational excellence.
Financial Condition
The company ended the quarter with cash and cash equivalents of $740 million and debt of $255 million.
Cash flow from operations was $66 million, up 104% year over year, driven by operating income performance and working capital efficiencies.
Guidance
Revenue growth is expected in the range of 6-9% on a year-over-year basis for fiscal 2018. The Zacks Consensus Estimate of revenues is pegged at $2.78 billion at the moment.
Adjusted operating earnings, as a percentage of revenues, is expected in the range of 18-19%.
Adjusted earnings per share is expected in the range of $4.43-$4.53. The Zacks Consensus Estimate of earnings is pegged at $4.33 at the moment.
Cash flow from operations is expected in the range of $475-$550 million for 2018.
In Conclusion
Varian Medical ended the second quarter on a solid note, with the Halcyon platform driving the top line.
Solid revenues from Oncology, growing adoption of Particle Therapy and strong overseas presence, particularly in the emerging countries are positives.
Varian Medical signed an agreement to acquire Sirtex, an Australian-based company focused on interventional oncology therapies for approximately AUD 1.6 billion. In Varian 360 Oncology care management platform, the company acquired Evinance Innovation, a small, privately-held Montreal-based company specializing in clinical decision support software.
A solid guidance for fiscal 2018 instills confidence in the stock.
On the flip side, the company did not book any new orders in the Proton Therapy unit. The company competes with large electronic companies as well as smaller and more specialized radiation therapy equipment manufacturers. Thus, competition is likely to mar revenues.
Q1 Earnings of MedTech Majors at a Glance
A few other top-ranked stocks in the medical space, which reported impressive results this earnings season, are Laboratory Corporation of America Holdings (LH - Free Report) , Chemed Corp. (CHE - Free Report) and Intuitive Surgical, Inc. (ISRG - Free Report) . While Intuitive Surgical sports a Zacks Rank #1 (Strong Buy), LabCorp and Chemed carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
LabCorp reported first-quarter 2018 adjusted earnings per share of $2.78, beating the Zacks Consensus Estimate by 5.3%. Revenues came in at $2.85 billion, exceeding the Zacks Consensus Estimate of $2.78 billion.
Chemed posted first-quarter 2018 adjusted earnings per share of $2.72, surpassing the Zacks Consensus Estimate of $2.37. Revenues came in at $439.2 million, beating the Zacks Consensus Estimate of $420 million.
Intuitive Surgical reported first-quarter 2018 adjusted earnings of $2.44 per share, which beat the Zacks Consensus Estimate by 22.6%. Revenues totaled $848 million, also surpassing the Zacks Consensus Estimate by 10.6%.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>