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What Drove Varian to Revise Its Revenue Guidance

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Company guidance

Year-over-year, Varian Medical Systems (VAR) expects its 4Q17 revenue to be flat or fall. According to the company, headwinds from the euro, British pound, and Japanese yen are expected to have an impact of around $10 million, $12 million, and $15 million, respectively. The company’s diluted EPS (earnings per share) are expected to be $1.15–$1.23 in 4Q17.

From 2Q17 through 4Q17, Varian expects its total revenue to grow 2%–3%. In comparison, in its 2Q17 earnings release, the company guided for revenue of 3%–5%. EPS are expected to be $3.08–$3.16.

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Major factors affecting guidance

Varian expects its Proton Therapy business to witness significant headwinds YoY (year-over-year). The company registered some US order slip-outs and operational challenges related to construction and installation timing at the end of 3Q17. These revenue issues led to the revised company guidance. The company’s emerging market backlog has grown substantially, by around 300 basis points YoY. According to the company, it spent three to six months converting its emerging market backlogs into sales. Conversions in emerging markets are significantly longer than US conversions, impacting the company’s revenue.

According to analysts’ projections, peers Accuray (ARAY), Boston Scientific (BSX), and C. R. Bard (BCR) are expected to earn revenue of $0.38 billion, $8.9 billion, and $3.9 billion, respectively, in fiscal 2017. Investors seeking exposure to Varian Medical Systems could consider the Vanguard S&P 500 ETF (IWF), which has a 0.08% exposure to Varian. In the next article, we’ll look at the company’s stock performance.

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