Will Varian Medical Systems (VAR) Miss Earnings Estimates?

Varian Medical Systems (VAR) is set to release its fiscal 2014-fourth quarter results on Oct 22, after the closing bell. In the last quarter, the company’s earnings met estimates. Let’s see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Varian Medical Systems operates in a technology-driven environment where success depends on the use of new technology, new product development and product upgrades. The company has been successful on the R&D front as evident from its year-over-year expansion in its top line.

In the last quarter, the company’s Imaging Components and Particle Therapy businesses performed well. Revenues in the quarter rose 3.0% to $747.7 million due to the strong gross orders in these businesses.

However, Oncology Systems business had disappointing orders in Japan and U.K. that eclipsed double-digit rise in orders in developing markets such as Latin America, China, and Eastern Europe.

For the fourth quarter of fiscal 2014, Varian Medical Systems expects revenues to increase in the range of 7 to 15%. The company also expects earnings per share in the range of $1.14 to $1.29 for the quarter. The current Zacks Consensus Estimate of $1.21 lies within the guided range.

Earnings Whispers?

Our proven model does not conclusively show that Varian Medical Systems is likely to beat earnings estimates this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: Earnings ESP, the difference between the Most Accurate Estimate of $1.12 and the Zacks Consensus Estimate of $1.21, stands at -7.44%.

Zacks Rank: The combination of Varian Medical Systems’ Zacks Rank #3 (Hold) and -7.44% ESP makes surprise prediction difficult. We caution against stocks with Zacks #4 and #5 Ranks (Sell rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Heartware International Inc. (HTWR) with an earnings ESP of 21.21% and a Zacks Rank #3 (Hold).

Hologic Inc. (HOLX) with an earnings ESP of 5.41% and a Zacks Rank #3 (Hold).

Hospira Inc. (HSP) with an earnings ESP of 7.55% and a Zacks Rank #3 (Hold).

Read the Full Research Report on VAR
Read the Full Research Report on HSP
Read the Full Research Report on HOLX
Read the Full Research Report on HTWR


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