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Varian Medical Q1 Profit Rises, Guides Q2 EPS Below View

Varian Medical Systems Inc. (VAR) Wednesday reported higher profit for the first quarter as revenue increased 8 percent with improvements in both segments. However, earnings per share were less than what analysts had expected. The company guided second-quarter profit below Street view and raised the lower end of its full year profit outlook. The stock fell over 4 percent in after-hours trading.

Dow Wilson, CEO, said, ''The company's first quarter revenues and net earnings grew in line with our expectations for both our Oncology Systems and X-Ray Products businesses. Margins were also in line with our expectations. Excluding the restructuring charge in the quarter, our operating margin improved versus the year-ago quarter.''

Net income climbed to $95.3 million or $0.86 per share from $90.2 million or $0.79 per share in the year-ago quarter.

The latest results included a $4.1 million restructuring charge related to an enhanced retirement program.

On average, 14 analysts polled by Thomson Reuters expected the company to earn $0.87 per share for the quarter. Analysts' estimates typically exclude special items.

Gross margin dropped to 42.9 percent from 43.0 percent.

Revenues rose 8 percent to $678.4 million from $625.3 million. Analysts had a consensus revenue estimate of $676.14 million for the quarter.

Revenue from Oncology Systems increased 8 percent to $524.3 million, and X-Ray Products revenue increased 18 percent to $132.9 million. Net orders climbed to $619.2 million from $606.1 million in the prior year, as a small decline in Oncology Systems, due to weaker orders in Europe and Asia, was offset by increased orders at X-Ray Products. Looking forward to the second quarter, net earnings per share are estimated in the range of $0.98 to $1.03 with the balance of restructuring charges from the enhanced retirement program. The company expects revenues to increase 5 to 6 percent year-over-year.

Analysts currently expect the company to earn $1.04 per share on revenue of $774.26 million for the second quarter.

For fiscal year 2013, the company continues to believe that revenues could increase 8 to 9 percent. Net earnings per share for fiscal 2013 could be in the range of $4.08 to $4.16. Previously, the company expected fiscal 2013 earnings to be in the range of $4.06 to $4.16 per share.

Analysts currently expect the company to earn $4.12 per share on revenue of $3.04 billion for the fiscal year 2013.

VAR closed down 0.3 percent on Wednesday at $74.91, and fell 4.2 percent in the extended trade.

by RTT Staff Writer

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