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Varian Medical (VAR) Q3 Earnings: Surprise in Store?

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Varian Medical Systems Inc. (VAR - Free Report) is scheduled to report third-quarter fiscal 2018 earnings on Jul 25, after the market closes. Favorable revenue opportunity from its Oncology and Imaging Component products, growing adoption of Proton Therapy and strong overseas presence are likely to drive the company’s earnings in the to-be-reported quarter.

In the last reported quarter, the company’s adjusted earnings came in at $1.15 per share, which surpassed the Zacks Consensus Estimate of $1.06. The metric also improved 27.8% on a year-over-year basis. Revenues of $729.9 million outpaced the Zacks Consensus Estimate of $659.6 million.

Currently, the Zacks Consensus Estimate for third-quarter revenues stands at $666.3 million, reflecting a rise of 0.6%. The same for adjusted earnings is pegged at a penny per share, mirroring a 3.9% decline.

Let’s delve deeper to find out the factors that are likely to impact Varian Medical’s upcoming quarterly results.

Varian Medical Systems, Inc. Price and Consensus

Oncology to Boost Growth

We are upbeat about Varian Medical’s oncology business that accounted for around 95.6% of the company’s total revenues in the second quarter. In the said quarter, oncology revenues totaled $698 million, up 6% at cc on a year-over-year basis.

Notably, Varian Medical’s solid performance in the Oncology business, margin expansion and the launch of Halcyon radiotherapy treatment system have been the key highlights of the fiscal third quarter. Moreover, the company has been addressing the tier 1 and mid-tier markets through its Edge, Truebeam and VitalBeam products and winning international contracts in the oncology space.

Varian Medical also inked an AUD 1.6 billion deal to acquire Sirtex, an Australian-based company, which is focused on interventional oncology therapies. This latest agreement expanded Varian Medical's addressable market into interventional oncology.

Per management, Varian Medical leverages its capabilities in treatment planning and delivery, image guidance, processing, oncology practice management software and radiation safety unit on Sirtex's interventional oncology platform. We expect this buyout to be accretive to the company’s third-quarter results.

In Varian 360 Oncology care management platform, Varian Medicalacquired Evinance Innovation — a small, privately-held Montreal-based company specializing in clinical decision support software — earlier this year.

Streak of Other Favorable Developments

On Jun 19, Varian Medical announced the installation of a Varian ProBeam cyclotron at the proton beam therapy center at University College Hospitals London NHS Foundation Trust in London.

In fact, the California-based provider of cancer care has already started consolidating its global foothold in providing proton therapy solutions (read more: Varian Medical's ProBeam Platform Gains Foothold in UK). The latest move is like to boost the company’s third-quarter bottom-line performance.

On May 17, Varian Medical announced a software technology training and education cooperation agreement with the Brazil Ministry of Health (MOH), and seven universities and science and technology institutions (ICTs) in Brazil. This will enable the company to increase its customer base in Brazil and across Latin America (read more: Varian Medical Merges With Brazil MOH to Fight Cancer).

Meanwhile, in Korea, Varian Medical’s flagship HyperArc High Definition Radiotherapy (HDRT) will be used to treat patients with brain cancer. HyperArc is a high-definition radiotherapy technology, which provides an intracranial radiosurgery solution, by capitalizing on the unique capabilities of Varian Medical's TrueBeam and EDGE treatment systems. It is supported by the company’s Eclipse treatment planning software.

On Apr 25, Varian Medical has signed an agreement with the Stockholm City Council for providing equipment and related services to the radiation therapy department of the New Karolinska Solna (NKS) hospital in Stockholm, Sweden with eight TrueBeam radiotherapy systems for advanced cancer treatment.

Earnings Whispers

Per our proven model, a stock needs to have a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) to deliver a positive earnings surprise in the fiscal third quarter. This is the case here as you will see below.

Zacks ESP: Varian Medical has an Earnings ESP of +1.08%. 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.

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.

AmerisourceBergen Corp. (ABC - Free Report) has an Earnings ESP of +0.34% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Bio-Rad Laboratories (BIO - Free Report) has an Earnings ESP of +7.41% and a Zacks Rank of 2.

DaVita Inc. (DVA - Free Report) has an Earnings ESP of +4.97% and a Zacks Rank #2.

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