Varex Imaging Corporation Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Predictions

Varex Imaging Corporation (NASDAQ:VREX) defied analyst predictions to release its quarterly results, which were ahead of market expectations. The company beat both earnings and revenue forecasts, with revenue of US$211m, some 2.9% above estimates, and statutory earnings per share (EPS) coming in at US$0.29, 78% 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. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

See our latest analysis for Varex Imaging

Taking into account the latest results, the consensus forecast from Varex Imaging's four analysts is for revenues of US$846.8m in 2022, which would reflect a meaningful 11% improvement in sales compared to the last 12 months. Varex Imaging is also expected to turn profitable, with statutory earnings of US$1.12 per share. Before this earnings report, the analysts had been forecasting revenues of US$830.7m and earnings per share (EPS) of US$0.66 in 2022. There was no real change to the revenue estimates, but the analysts do seem more bullish on earnings, given the massive increase in earnings per share expectations following these results.

The consensus price target rose 8.0% to US$37.25, suggesting that higher earnings estimates flow through to the stock's valuation as well. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic Varex Imaging analyst has a price target of US$45.00 per share, while the most pessimistic values it at US$30.00. As you can see, analysts are not all in agreement on the stock's future, but the range of estimates is still reasonably narrow, which could suggest that the outcome is not totally unpredictable.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Varex Imaging's past performance and to peers in the same industry. The analysts are definitely expecting Varex Imaging's growth to accelerate, with the forecast 8.8% annualised growth to the end of 2022 ranking favourably alongside historical growth of 3.8% per annum over the past five years. Other similar companies in the industry (with analyst coverage) are also forecast to grow their revenue at 8.1% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Varex Imaging is expected to grow at about the same rate as the wider industry.

The Bottom Line

The most important thing here is that the analysts upgraded their earnings per share estimates, suggesting that there has been a clear increase in optimism towards Varex Imaging following these results. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall industry. There was also a nice increase in the price target, with the analysts clearly feeling that the intrinsic value of the business is improving.

Following on from that line of thought, we think that the long-term prospects of the business are much more relevant than next year's earnings. At Simply Wall St, we have a full range of analyst estimates for Varex Imaging going out to 2023, and you can see them free on our platform here..

However, before you get too enthused, we've discovered 1 warning sign for Varex Imaging that you should be aware of.

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This article by Simply Wall St is general in nature. 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.
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