Varian Medical Systems (NYSE: VAR) manufactures
medical devices for treating cancer and other medical conditions with radiotherapy, radiosurgery, proton therapy and brachytherapy. The company also provides X-ray detectors for industrial/security applications and software for managing radiotherapy centers. The firm has manufacturing sites in North America, Europe and China and operates some 60 sales/support offices around the world.
Varian pleased investors last week, when it reported Q3 EPS of 58 cents and revenues of $513 million. Analysts had been looking for 46 cents and $480.3 million. The CEO noted that faster than expected acceptance of Varian's oncology products was a major factor leading to the successful quarter. Management also guided FY08 EPS to about $2.23 ($2.11 consensus) and FY08 revenues to about $2.08-$2.096 billion ($2.05B consensus). Needham and Lazard Capital subsequently reiterated "buy" ratings on the shares.
The issue
popped on the news and then moved into a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.
Altogether, brokers recommend the stock with four "strong buys" and four "buys". The VAR Sales Growth rate (21.08%), EPS Growth rate (48.72%), Operating Margin (19.26%), Net Profit Margin (13.84%), Return on Assets (16.12%), Return on Investment (28.18%) and Return on Equity (31.82%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 88% of the outstanding shares. The stock is one of those used to calculate the S&P 500 Index. Over the past 52 weeks, it has traded between $37.30 and $60.94. A stop-loss of $51.75 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold a position in the stock discussed above.
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