Q4 2024 Earnings Summary
Reported on Feb 25, 2025 (After Market Close)
Pre-Earnings Price$14.56Last close (Nov 19, 2024)
Post-Earnings Price$15.23Open (Nov 20, 2024)
Price Change
$0.67(+4.60%)
- Varex is progressing with its India expansion, expecting one factory to begin production in the second half of fiscal 2025 and a second factory in early fiscal 2026, aiming to produce competitive products for global consumption and gain a cost advantage.
- Varex is entering the security scanning systems market directly, offering complete solutions like cargo inspection systems, which could open new revenue streams and potentially higher margins, as they can compete both as a supplier of components and as a provider of full systems.
- Varex expects the impact of customer destocking to subside by the first calendar quarter, based on early indications from order intake rates and customer conversations, potentially leading to increased orders and revenue growth.
- Uncertainty in China Market Recovery: Varex Imaging's revenue from China has stabilized at lower levels, with $31 million reported in the latest quarter—unchanged from the same period last year but down from previous years. The company mentions that the timing of any significant pickup in China is still uncertain, and they have not yet seen a measurable impact from the anticipated stimulus funds. Additionally, only a portion of the overall stimulus package is allocated to healthcare, which may limit the potential revenue growth from this region.
- Declining Gross Margins in the Industrial Segment: Despite an increase in sales within the Industrial segment, Varex Imaging is experiencing steadily decreasing gross margins in this area. This decline is attributed to a higher volume of low-margin linear accelerators sold into the cargo inspection market, which are priced much lower than the corporate gross margin. This trend is adversely affecting the overall corporate gross margins, offsetting the improvements made in the Medical segment.
- Potential Impact of Changes in Tariff Regimes and Political Uncertainties: The company expresses caution due to potential changes in the tariff regime with the incoming administration. Such changes could affect input costs for materials imported into the U.S. from China and could lead to retaliatory tariffs impacting global sales and gross margins. While Varex Imaging has increased local manufacturing to mitigate some risks, the unpredictability of tariff policies introduces uncertainties that could negatively affect operations and profitability.