Piper Jaffray Gives Earnings Preview On Varian Medical Systems

Piper Jaffray expects Varian Medical Systems VAR to post FQ1 results on Wednesday evening that meet or exceed current estimates. Piper's checks with private radiation therapy providers coupled with recent operating results from large capital equipment providers support its thesis for an improving US capital spending backdrop. Piper believes upside is possible relative to its estimates and is confident that earnings growth will accelerate in the coming years as backlog and orders are eventually translated into sales. Still, with shares trading at 20x CY11 EPS estimate, it believes the stock is fairly valued at present and would look for a pullback into the low $60's to be more constructive. Piper Jaffray believes that demand for the company's TrueBeam system remains strong and expectations for future regulatory approvals in key regions could spur incremental order demand in the coming years. Long-term, it expects accelerating demand in emerging markets, particularly in India, Brazil and China, to drive significant growth for VAR. Piper has a $70 PT and Neutral rating on VAR VAR is trading higher at $71.41