Varian Medical Systems Inc. (VAR)

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"...Wall Street took a mostly positive view of the company's results, with several saying the newly approved RapidArc radiation therapy system will likely drive growth during the year. Other healthy indicators include revenue growth from the company's other units, which sell X-ray and security inspection products.

"We expect U.S. and worldwide cancer incidence to continue to rise, thereby driving continued demand for sophisticated cancer therapies," Citi analyst Amit Bhalla said in a note to investors. "Currently, about 50 percent of all cancer patients receive some form of radiation therapy during an overall treatment and we expect demand to persist going forward."

That demand helped fuel the company's 12 percent profit jump during the first quarter and its expectations for continued earnings and sales growth. In 2008, the company expects profit between $2.05 and $2.07 per share on about $2.03 billion in revenue, while Wall Street forecasts profit of about $2.05 per share on $1.97 billion in revenue.

Bhalla reaffirmed his "Buy" rating on the stock, but cut his price target to $61 from $62, citing higher expense expectations. He said cancer therapy systems remain the focus for the company, with 14 Novalis radiosurgery systems ordered during the quarter and one RapidArc system. But X-ray system orders rose 11 percent and will likely continue growing as digital imaging technology becomes more important in the field.

There is also potential for security systems growth if port security becomes a priority for the U.S. government, he said. The systems are used to scan shipping containers.

Oppenheimer & Co. analyst Amit Hazan also said the company is poised for continued growth in each of its units, reaffirming an "Outperform" rating with a $59 price target. He said Varian remains a top pick for the medical equipment sector, as the company has posted double-digit growth three straight quarters in its cancer treatment unit.

He said the addition of RapidArc will likely help the company sustain its current contracts and reel in new contracts it may have lost to competitors. Also, the company's security systems don't have any direct competition, meaning Varian could see a contract windfall from the U.S. and other governments.

Despite the broader positive outlook, Jefferies & Co. analyst Mark Richter remains cautious on the stock, reaffirming a "Hold" rating and reducing his price target to $42 from $45. His main concern is whether more competition will cut into Varian's order growth.

RapidArc provides a competitive technology, he said, but gains may not be realized in the near term. Rivals TomoTherapy Inc., Accuray Inc., and Elekta could stifle Varian's growth with additional products on the market. Also, RapidArc's growth could be slow going because of physician concerns over limited experience and debugging issues with the new technology.

"Our channel checks indicate that although many clinicians are interested in Varian's RapidArc technology, many are waiting for end user experience and clinical data prior to investing," he said in a note to investors..."

Thursday January 24, 7:31 pm ET

http://biz.yahoo.com/ap/080124/varian_medical_mover.html?.v=2