Morgan Stanley Maintains on Varian Medical Systems

In a report published Thursday, Morgan Stanley analyst Steve Beuchaw maintained Underweight on Varian Medical Systems (NYSE: VAR), with a $71.00 price target.

According to the report, orders missed consensus by 3 percent in Oncology and 12 percent overall, though US Oncology rebounded after a weak FY13 to largely offset international weakness.

“While it is difficult to precisely call out the trend in US Oncology due to changes to reporting structure, tone on the market was positive and gross orders +13% accelerated from +5% in the September quarter,” the report noted. “Results were at odds with our more negative survey and diligence, and we remain cautious on the market. On the downside, int'l orders were -5% despite a -2% comp, driving a +2.7% total Oncology net order figure against a -1% comp (Exhibit 1). In sum, Oncology order growth remains muted and the Oncology backlog declined 2% qr/qr, leaving us comfortable with our forecast for deceleration in the business into ‘15.”

Some highlights from the report included:

-Guidance for 2Q leaves a high bar for 2H14 -Minor model updates; maintain $71 PT

VAR closed Wednesday at $82.99.