Here's Why You Should Hold Varian Medical (VAR) Stock Now

Zacks Equity Research

Varian Medical Systems, Inc. VAR is currently gaining from a slew of overseas developments and a raised guidance. However, tariff woes from the U.S.-China trade dispute plague the company.

Shares Up

Over the past year, shares of this Zacks Rank #3 (Hold) company have increased 8% against the industry’s 2.6% decline. Shares have also outperformed the S&P 500 index’s 3.1% rally.

What’s Favoring the Stock?

Strong View

In recent times, Varian Medical raised its guidance for 2019 revenues to $3.09-$3.18 billion from the previously guided range of $3.06-$3.15 billion.

Moreover, the company continues to expect adjusted earnings per share of $4.60-$4.75.

Varian Medical Systems, Inc. Price and Consensus

 

Varian Medical Systems, Inc. Price and Consensus

Varian Medical Systems, Inc. price-consensus-chart | Varian Medical Systems, Inc. Quote

Overseas Developments

Varian Medical has been making noteworthy progress worldwide in recent times, contributing significantly to the top line.

For instance, the company recently entered a definitive agreement to acquire Cancer Treatment Services International for $283 million. The acquisition is expected to boost Varian Medical’s core Oncology Systems business. The buyout is expected to be accretive to the company’s adjusted earnings per share during fiscal 2021.

Additionally, the company recently announced the completion of the cyclotron installation for the Varian ProBeam Compact single-room proton therapy system at Biopolis, an international biomedical research hub in Singapore.

Earlier this month, Varian Medical announced that Ofuna Chuo Hospital, Kamakura City, Kanagawa Prefecture, is the first clinic in Japan to begin cancer treatment with the Halcyon radiotherapy system. (Read More: Varian's Halcyon to Treat Patients at Japan's Hospital)

Deterrents

The U.S.-China trade dispute has impacted overseas sales of several MedTech manufacturers. This affected Varian Medical’s last-quarter revenues by $9 million. In fact, the core Proton business was impacted by $7 million in recent times.

Which Way Are Estimates Headed?

For the fiscal third quarter, the Zacks Consensus Estimate for earnings is pegged at $1.14, indicating an increase of 9.6% from the year-ago quarter’s reported figure. The same for revenues is pinned at $760.2 million, suggesting an increase of 7.2% from the figure reported in the year-ago quarter.

For fiscal 2019, the Zacks Consensus Estimate for revenues is $3.14 billion, calling for a rise of 7.5% from the year-ago quarter’s reported figure. The same for earnings stands at $4.66, implying growth of 5.4% from the figure reported in the year-ago quarter.

Key Picks

Some better-ranked stocks in the broader medical space are Cerner Corporation CERN, Penumbra PEN and Bruker Corporation BRKR. While Cerner sports a Zacks Rank #1 (Strong Buy), others carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cerner’s long-term earnings growth rate is expected to be 13.5%.

Penumbra’s long-term earnings growth rate is projected at 21.5%.

Bruker’s long-term earnings growth rate is estimated at 11.7%.

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