Earnings Beat: Varex Imaging Corporation Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

Varex Imaging Corporation (NASDAQ:VREX) just released its quarterly report and things are looking bullish. The company beat forecasts, with revenue of US$213m, some 3.0% above estimates, and statutory earnings per share (EPS) coming in at US$0.17, 183% ahead of expectations. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

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Taking into account the latest results, Varex Imaging's five analysts currently expect revenues in 2025 to be US$811.4m, approximately in line with the last 12 months. Varex Imaging is also expected to turn profitable, with statutory earnings of US$0.23 per share. Before this earnings report, the analysts had been forecasting revenues of US$828.1m and earnings per share (EPS) of US$0.48 in 2025. From this we can that sentiment has definitely become more bearish after the latest results, leading to lower revenue forecasts and a pretty serious reduction to earnings per share estimates.

View our latest analysis for Varex Imaging

The consensus price target fell 8.5% to US$19.40, with the weaker earnings outlook clearly leading valuation estimates. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Varex Imaging at US$23.00 per share, while the most bearish prices it at US$10.00. This is a fairly broad spread of estimates, suggesting that analysts are forecasting a wide range of possible outcomes for the business.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that revenue is expected to slow, with a forecast annualised decline of 3.9% by the end of 2025. This indicates a significant reduction from annual growth of 2.6% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 8.2% per year. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - Varex Imaging is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. Unfortunately, they also downgraded their revenue estimates, and our data indicates underperformance compared to the wider industry. Even so, earnings per share are more important to the intrinsic value of the business. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

With that in mind, we wouldn't be too quick to come to a conclusion on Varex Imaging. Long-term earnings power is much more important than next year's profits. We have forecasts for Varex Imaging going out to 2027, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 2 warning signs for Varex Imaging (1 shouldn't be ignored!) that you need to be mindful of.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.