How Double-Digit Orders Growth Is Driving Varian Medical Systems

Varian’s performance in 4Q17 and fiscal 2017

Varian Medical Systems (VAR) registered a YoY (year-over-year) sales decline of ~1% in fiscal 4Q17, which was reported on October 25, 2017. Sales in the quarter were $739 million. That compares to $662.4 million in 3Q17, representing a 3% YoY growth.

How Double-Digit Orders Growth Is Driving Varian Medical Systems

For fiscal 2017, the company reported sales of $2.7 billion, representing a 2% YoY growth. Oncology revenues contributed 93% of sales, or $2.5 billion. The rest of the sales came from the company’s particle therapy business. Oncology sales growth in fiscal 2017 was 1%, whereas orders increased 7%. Varian’s total orders growth for fiscal 2017 was 11%. Backlog registered growth of 9% and was reported to be $3.2 billion at the end of fiscal 2017.

Products and services orders growth boosts performance

Growth in orders in fiscal 4Q17 and fiscal 2017 was boosted by double-digit growth in services and hardware and software upgrades. Varian’s software solutions continue to see a strong uptake, driven by a strong demand for its ARIA oncology information systems and Eclipse treatment planning system. The company’s Linear Accelerator’s installed base has grown 4% in fiscal 2017. The company currently has 7,833 systems installed around the world.

Some of the other recent applications that are expected to accelerate demand for Varian software solutions include Varian’s InSightive analytics solution, RapidPlan and multi-criteria optimization, Velocity longitudinal cancer imaging solution, and 360 Oncology cloud-based cancer operating platform.

Accuray (ARAY), Boston Scientific (BSX), and GE Healthcare (GE), which are other US oncology technology providers, generated revenues of $0.09 billion, $2.2 billion, and $33.5 billion, respectively, in their recently reported quarters.

For indirect exposure to Varian Medical Systems, investors can consider the iShares MSCI USA Minimum Volatility (USMV), which has 0.56% of its total holdings in VAR.