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Varian Medical Hits 52-Week High; Oncology Prospects Bright

VAR BAX NUVA GWPH

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Share price of Varian Medical Systems Inc. (VAR - Free Report) rallied to a new 52-week high of $98.73 on Sep 22. This represents an impressive year-to-date return of approximately 21.9%, better than the S&P 500’s 6.5% over the same period.

Currently, Varian Medical has a Zacks Rank #3 (Hold). Notably, the stock has a market cap of $9.13 billion.

Key Factors

Varian’s oncology business growth prospects are impressive. The company is addressing both the tier 1 and mid-tier markets through its Edge, Truebeam and VitalBeam products. The company is also winning contracts, not only in the Americas but also in international markets, which is a huge positive.

Strong third-quarter 2016 results validate the company’s growth scenario. Adjusted earnings of $1.22 per share beat the Zacks Consensus Estimate by a nickel and increased 6.1% on a year-over-year basis. The figure comfortably surpassed management’s guided range of $1.16–$1.20 per share.
 

VARIAN MEDICAL Price and Consensus

VARIAN MEDICAL Price and Consensus | VARIAN MEDICAL Quote

Oncology System sales increased 8.3% from the year-ago quarter to $605.2 million, while gross orders increased 6.4% to $675.9 million in the quarter. Moreover, Oncology gross margin improved more than 400 basis points to 46% driven by favorable product mix (higher mix of TrueBeams and software) as well as productivity gains.

Following robust results, Varian raised its fiscal 2016 guidance. The company now expects adjusted earnings in the range of $4.62–$4.66 per share, up from the previously guided range of $4.55–$4.65 per share. Revenues are still expected to increase 3% in fiscal 2016.

Estimate Revisions

The Zacks Consensus Estimate for fiscal 2016 increased by a penny to $4.65 over the last 30 days. For fiscal 2017, estimates have remained steady at $4.94 over the same time frame.

Key Sector Picks

Better-ranked stocks in the medical sector include GW Pharmaceuticals plc (GWPH - Free Report) , NuVasive, Inc. (NUVA - Free Report) and Baxter International Inc. (BAX - Free Report) . Each of these stocks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

GW Pharmaceuticals consistently surpassed expectations in the last four quarters, with an average positive surprise of 41.67%. This represents an impressive year-to-date return of approximately 58.1%, better than the S&P 500’s 6.5% over the same period.

NuVasive also has a steady record in beating earnings expectations over the last four quarters, with an average positive surprise of 18.98%. This represents an impressive year-to-date return of approximately 25.78%, better than the S&P 500’s 6.5% over the same period.

Finally, Baxter International also surpassed expectations in each of the last four quarters, with an average positive surprise of 30.55%. This represents an impressive year-to-date return of approximately 26.34%, better than the S&P 500’s 6.5% over the same period.

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