October 26, 2012
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of radiation-emitting-device maker Varian Medical Systems (NYSE: VAR ) surged 16% today after its quarterly results and guidance easily topped Wall Street expectations.
So what: Varian shares have slumped in 2012 on lackluster revenue growth, but today's wide fourth-quarter beat -- adjusted EPS of $1.08 on revenue of $756 million versus the consensus of $1.03 and $747 million, respectively -- and upbeat guidance are forcing analysts to increase their valuation estimates. Sales at its oncology systems and X-ray products segments rose a solid 7% and 9%, respectively, suggesting that overall demand is much healthier than Mr. Market had previously thought.
Now what: Management now sees 2013 EPS of $4.06-$4.16 and revenue growth of 8%-9%. "Our company is positioned for growth by focusing on continuous innovation, expanding our global presence, building our software and service franchises and commercializing protons," CEO Dow Wilson said in a statement. More important, with the stock still off its 52-week highs and trading at a forward P/E of 15, there might still be enough room to buy into that growth.
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