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Varian Expands in Croatia with Edge Radiosurgery Product

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Palo Alto, CA-based Varian Medical Systems, Inc. , a leading manufacturer of medical devices and software for treating cancer with radiation, recently announced that its flagship product Edge Radiosurgery system is being installed at Croatia-based Radiochirurgia Zagreb Clinic. Radiosurgical treatments using the system are expected to start by Jan 2017.

Meanwhile, over the last six months, the stock represents a solid return of almost 11.5%, comparing favorably with the Zacks categorized Medical Instruments sub-industry’s negative return of roughly 2.2%. However, Varian’s shares did not follow the favorable market trend, declining a nominal 0.6% to close at $91.06 following the news.

We are concerned about the unfavorable estimate revision trend for the stock as three estimates moved south in the last two months. Notably, the current year estimates for the stock dropped by 3 cents to $4.93 per share over the same time frame.

On a brighter note, one estimate moved north in the last one month. Additionally, a long-term expected earnings growth rate of 15% and an earnings yield of 5.4%, compared to the industry’s negative yield of 4.3% instill investor confidence on the stock.

Coming back to the latest development, the system marks Southeastern Europe's first Edge product from Varian. In this regard, the system delivers full-body radiosurgery treatment with precision.

Per management, the system will allow patients in the region to access a wide range of early-stage cancer screening procedures. The expansion in Croatia fortifies Varian’s foothold in Europe, a major participant in the global radiotherapy market. On this note, the global radiotherapy market is forecasted to reach a worth of $7,544.8 million by 2020, multiplying at a CAGR of 6.2% (Markets And Markets).

Our Take

Of late, Varian has been gaining prominence, courtesy of its solid oncology business prospects. We note that the company addresses both tier 1 and mid-tier markets through its Edge, Truebeam and VitalBeam products.

We are also upbeat about the company’s first-quarter fiscal 2017 guidance wherein revenues are expected to increase about 1% to 2% on a year-over-year basis.

Of the other developments, Varian was recently included in the inaugural JUST 100 List. Per the list, Varian is the nation’s ‘Most JUST Company’ in the Healthcare Equipment and Services industry. Notably, the list was prepared by independent non-profit organization JUST Capital and Forbes magazine.

On the flip side, the company promises a negative return of 0.6% in terms of projected sales for the current year, comparing unfavorably with the industry’s 6.3% sales growth.

Zacks Rank & Key Picks

Currently, Varian has a Zacks Rank #3 (Hold).

Better-ranked stocks in the broader medical sector include Addus HomeCare Corporation (ADUS - Free Report) , LHC Group, Inc. and HMS Holdings Corp. . Addus HomeCare and LHC Group sport a Zacks Rank #1 (Strong Buy) while HMS Holdings carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Addus HomeCare has a long-term expected earnings growth rate of approximately 15%. Notably, the stock represents an impressive one-year return of 47.9%.

LHC Group has a long-term expected earnings growth rate of 15%. The company has returned almost 2.4% in the last one month.

HMS Holdings has an expected earnings growth of almost 14.3%. The company posted a promising year-to-date return of 48%.

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