Varian Medical: A Smart Buy

Varian Medical Systems (VAR) took a big hit on Friday, dropping 7.3% on news of lower revenue guidance. But the stock’s defenders are coming out in full force. Joshua Lipton of Forbes noted the positive views of many analysts:

In a client note, Citigroup analyst Amit Bhalla wrote that while North America has not displayed signs of weakness in past quarters, the results do appear explainable.
The North America miss, Bhalla wrote, was due to timing of customer buying patterns and had the quarter been one week longer, orders would have been $20 million higher and total North America oncology net orders would have been flat, instead of down 10%.
Bhalla said, “As was the case in Europe last quarter, the company does not believe that it has lost orders to competitors in North America and we believe this to be the case as well.”
Bhalla maintained a “buy” rating on the shares. He lowered his price target by $2 to $60.
Standard & Poor’s Equity Research analyst Robert Gold also continued to believe that Varian is a wise buy.
In a client note, Gold wrote that he was disappointed by the 10% decline in U.S. oncology orders.
“However, we believe an increased size of average orders, and a slightly more competitive market are extending the selling cycle a bit and have pushed some booking into the third-quarter,” Gold wrote.
He said that he still sees full fiscal 2007 revenues of about $1.8 billion and earnings per share of $1.83. He maintained a “strong buy” opinion on the shares.

Posted by Eddy Elfenbein on April 16th, 2007 at 1:05 pm

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