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Varian Slips on Outlook

Varian Medical Systems (VAR - Get Report) sank 3% late Wednesday after offering soft second-quarter guidance.

The news came as the company reported strong quarterly earnings and raised its full-year guidance, citing strong demand for its medical equipment.

The Palo Alto, Calif.-based manufacturer earned $50 million, or 37 cents a share, in its fiscal first quarter, up from of $41 million, or 30 cents a share, a year ago. Analysts surveyed by Thomson First Call were expecting Varian to earn 36 cents a share.

Revenue reached $388 million for the quarter, up 16% from the year-ago period. Revenue from its oncology systems totaled $316 million, up 15% from a year ago. X-ray product revenue was $62 million, 19% higher than the year-ago quarter. Analysts were expecting overall revenue of $382.15 million.

"This quarter was highlighted by strong growth in net orders for image-guided radiotherapy and stereotactic radiosurgery products in North America and for flat-panel digital image detectors for filmless X-rays," said Timothy Guertin, president and CEO of Varian Medical Systems, in a press release after the close of trading Wednesday.

For the full year, Varian expects revenue to grow 13%, with 7% to 9% growth in its second quarter. The company's 2007 earnings should be between $1.89 and $1.91 a share, with second quarter earnings at around 46 cents a share, excluding the impact of Varian's intended acquisition of Accel Instruments.

Analysts were looking for 48 cents for the quarter and $1.87 for the year.

Shares dropped $1.70 late Wednesday to $48.44.

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