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Why Varex Imaging Stock Fell 26.3% on August 3

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Varex Imaging’s stock price movement

On August 2, Varex Imaging (VREX) reported revenues of ~$191 million for Q3 2018, a YoY rise of around 12%. The revenues were driven by the robust uptake of the company’s oncology, radiographic, mammography, cargo security, software, and connect and control products. The company also reported adjusted diluted earnings per share (or EPS) close to $0.34 in Q3. However, the company fell short of the Wall Street consensus revenue estimate and consensus adjusted diluted earnings per share (or EPS) estimate by around $5.7 million and $0.17, respectively. The revenue and earnings miss pushed down Varex Imaging’s stock by ~26.3% to ~$28.4 on August 3, 2018.

Further, in its Q3 2018 earnings conference call, Varex Imaging projected total revenues to be in the range of $755 million to $765 million, a YoY rise of 8% to 10%, for fiscal 2018. This is lower than the previously projected YoY revenue growth guidance range for fiscal 2018, which was 13% to 14%.

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Medical segment performance

In the third quarter, Varex Imaging’s Medical segment, which accounts for almost 80% of the company’s total revenues, posted sales close to $143 million, which is a YoY rise of around 6%. Although lower than previously anticipated, this performance was driven mainly by the increasing adoption of the company’s radiographic digital detectors as well as mammography X-ray tubes. Since China accounted for almost 10% of Varex Imaging’s revenues in fiscal 2017, the company witnessed some decline in demand late in Q3 2018, which could be attributable to the increasing uncertainty related to tariffs resulting from the US-China trade war. The company also witnessed reduced demand from certain Japanese clients in Q3 2018.

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