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Lackluster Q4 leaves Varian "still in choppy waters"

This article was originally published in Clinica

Executive Summary

Radiotherapy specialist Varian Medical Systems’ fourth-quarter “wasn’t stellar, with in-line revenues but light earnings and light orders,” according to Jefferies analyst Raj Denhoy. Morgan Stanley’s Steve Beuchaw agreed that the firm is “still in choppy waters,” and Varian’s CEO Dow Wilson admitted the quarter was “mixed.” The US market was particularly problematic, with orders in the country down 6% (gross) and 35% (net) – exceeding Mr Denhoy’s prediction of a 2% decline. For fiscal 2014, Varian is predicting 6-8% revenue growth and earnings of $4.22-4.34 per diluted share (representing 6-9% expansion). Mr Beuchaw believes there is a potential for a 2014 recovery should there be an improvement in the US reimbursement landscape for clinics that use the company’s products; a decision is due in mid/late November, but the analyst is cautious on how favorable this is likely to be. Mr Denhoy was more optimistic, concluding: “Longer-term there are still good reasons to believe Varian can show leverage.” Varian’s share price closed up 2% on 23 October, the day it released the results.

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