February 5, 2009 - Varian Medical Systems, Inc. (VAR-NYSE) together with its subsidiaries, provides cancer therapy systems and X-ray products worldwide. The company's Oncology Systems segment designs, manufacturers, sells, and services hardware and software products for treating cancer. Product line includes linear accelerators, brachytherapy afterloaders, treatment simulation, verification equipment, and accessories; as well as information management, treatment planning, and image processing software. This segment serves university research and community hospitals, private and governmental institutions, healthcare agencies, physicians' offices,and cancer care clinics.

The company also designs, manufactures, sells, and services Linatron x-ray accelerators, imaging processing software, and image detection products for security and inspection purposes, such as cargo screening at ports and borders, and nondestructive examination in various applications.

In addition, it develops products and systems for delivering proton therapy; and technologies in the areas of digital X-ray imaging technology, volumetric and functional imaging, improved X-ray sources, and
technology for security and cargo screening applications.

The company was formerly known as Varian Associates, Inc. and changed its name to Varian Medical Systems, Inc. in April 1999. Varian Medical Systems, Inc. was founded in 1948 and is headquartered in Palo Alto, California.

Order flow is slowing in some divisions but parsing that slowdown gives some comfort. Net orders were down 10% in the fiscal first quarter (year ends October 1). But just one order for proton therapy was worth $62 million. If that one order were excluded, sales were up 1%. Still oncology orders were down 3% on a constant currency basis (up 2% if currency gains were counted) thanks to strong international sales which were up 19% or 9% without the currency impact. Domestic orders were down 14%.

On the earnings side, there's been a steady, positive incline. In 2006, earnings per share were $1.83, then went to $2.31, following by $2.65. This year, 11 analysts have a consensus of $2.83 (with a range of $2.77 to $2.94), then a projection of $3.15 for 2011. Management recently raised its earnings guidance for 2010 to $2.76 - $2.83 after a strong first quarter.

However, there is a possible black cloud looming for VAR. It's in the form of Health Care Reform and the hospital spending environment. Depending on how Congress, the Senate and the President formulate new government programs for healthcare and where money will be allocated, there will most likely be changes in current expenditures. If all talks breakdown and new legislature isn't passed, analysts' and management projections should hold true.

More numbers: Market Cap is $6.08 billion. Trailing P/E is 18.63 while the Forward P/E is 15.57. Price to book is 4.47. Book value is $10.89. Operating margin for the last 12 months was 22.16%. Profit margin was 14.65%. Return on assets was 14.16%. Return on equity was a remarkable 28.43%. Total cash is $625 million for $5.05 a share. Total debt is $36.63 million or 4% of capital. Current ratio is 2.02. Beta is a low .69. The 52- week low was $27.10 on March 6, 2009. The 52-week high was $50.86 on February 1, 2010. The all-time high was in 2008 at $65.80. There are 123.93 million shares outstanding with a Float of 123.38 million. Insiders own .42%. Institutions have 93.10%. There is no dividend. Value Line gives the company an A+ rating for Financial Strength.

Varian is a strong company from almost every perspective. Sales are going well in a weak global economy. Profits are increasing. The balance sheet isn't leveraged. Investors have bid the stock up consistently since the famous market meltdown in early 2009. But now the future is a little cloudy with the uncertainty of health care reform on the horizon. As soon as that is resolved, expect VAR to adjust to whatever the new order is and continue to do well for its shareholders.

- Company Web site: www.varian.com

- Ted Allrich