Varian Medical Systems Inc. (VAR - Free Report) is scheduled to report second-quarter fiscal 2018 earnings on Apr 26, after the market closes. Favorable revenue opportunity from its various Oncology and Imaging Component products, growing adoption of Proton Therapy and strong overseas presence are likely to drive the company’s second-quarter fiscal 2018 earnings.
Last quarter, the company delivered adjusted earnings of $1.06 per share, which beat the Zacks Consensus Estimate of 98 cents. Adjusted earnings also improved 112% on a year-over-year basis. Revenues totaled $678.5 million, which beat the Zacks Consensus Estimate of $639.47 million.
In the second quarter of 2018, the Zacks Consensus Estimate for revenues is pegged at $693.9 million, reflecting a rise of 5.9% year over year. The Zacks Consensus Estimate for adjusted earnings is pegged at $1.03 per share, indicating an increase of 15.7% year over year.
Varian Medical Systems, Inc. Price and EPS Surprise
Let’s delve into factors which are likely to impact Varian Medical’s upcoming quarterly results.
Factors at Play
Oncology to Drive Growth:We are upbeat about Varian Medical’s oncology business that accounted for around 95% of the company’s total revenues in the last quarter. Notably, the company has been addressing the tier 1 and mid-tier markets through its Edge, Truebeam and VitalBeam products and has been winning international contracts in the oncology space.
In a bid to overhaul its Oncology Systems segment, Varian Medical recently acquired Montreal-based privately-held Evinance Innovation, Inc. — a clinical decision support (CDS) software company. The deal was initiated in September 2017. The company had stated that it will utilize Evinance’s patented technology to offer better services to clients.
On Mar 20, Varian Medical announced that St. Petersburg Center of Nuclear Medicine successfully completed its first pediatric patient treatment with the Varian ProBeam proton therapy system.
Product Launch: The successful launch of Halcyon Therapy System deserves a mention in this regard. Varian Medical has been undertaking initiatives to attract customers to its broad spectrum of products. Recently, the company unveiled the Halcyon radiotherapy treatment system recently.
In the first quarter of fiscal 2018, the Halcyon platform witnessed 62 orders since its inception in 2017. This reflects solid demand for the platform in the quarters ahead.
On Jan 8, Varian Medical announced that its Halcyon system has received Taiwan FDA approval, which will allow the company to market this new cancer treatment system in the country.
On Feb 6, Varian Medical announced the Halcyon cancer treatment platform received Atomic Energy Regulatory Board (AERB) Certificate for Import and Supply in India.
For 2018, the company expects revenues in the range of 4-7%. Adjusted earnings per share are expected in the band of $4.24-$ 4.36, while cash flow from operations are projected in the range of $475-$550 million.
Cut-throat Competition:Varian Medical competes with large electronic companies such as Siemens and Philips as well as with smaller and more specialized radiation therapy equipment manufacturers like Elekta and Accuray.
In the emerging proton therapy market, the company faces competition from Hitachi, Ion Beam Applications, Mevion Medical Systems and Sumitomo. Intense competition is anticipated to increase R&D expenditures in the nascent proton therapy market, which will dent margins. Moreover, pricing pressure in traditional radiotherapy is a major concern.
Our proven model does not show earnings beat for Varian Medical this quarter. This is because a stock needs to have a positive Earnings ESPand a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP:Varian Medical currently has an Earnings ESP of 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Varian Medical carries a Zacks Rank #3 which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.
Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revision.
Stocks Worth a Look
Here are a few medical stocks worth considering as they have the right combination of elements to post an earnings beat this quarter.
Bio-Rad Laboratories (BIO - Free Report) has an Earnings ESP of +20.43% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Cardinal Heath (CAH - Free Report) has an Earnings ESP of +0.33% and a Zacks Rank #2.
Abbott Laboratories (ABT - Free Report) has an Earnings ESP of +0.75% and a Zacks Rank #3.
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