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Varian Medical's (VAR) Halcyon Excluded From Trade Tariffs

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Varian Medical Systems, Inc. (VAR - Free Report) received approval from the United States Trade Representative (USTR) for the exclusion of its flagship Halcyon radiotherapy systems from Section 301 tariffs. Notably, Halcyon radiotherapy systems are manufactured in China.

It is encouraging to note that in the last month, the much-coveted system has been approved by the China National Medical Product Administration. (Read More: Varian Medical's Halcyon Gets NMPA Approval in China)

However, the latest development failed to drive Varian Medical’s shares, which dipped 0.5% to $106.90 at the close, following the announcement.

Coming back to the news, the tariff exclusion is expected to have nearly $1-million impact on Varian Medical’s financial results in fiscal 2019. Notably, the company’s exclusion applications from the U.S. tariffs for components sourced from China for linear accelerators manufactured in the country are still pending with the USTR.

Cancer Research UK predicts that by 2040 there will be 27.5 million new cancer cases worldwide each year. Varian Medical is likely to benefit from the latest development.

US MedTech Hit by Trade War Volatilities

Accusing China of unfair trade practices, President Trump previously imposed tariffs on $16 billion worth of Chinese imports in August 2018. Additionally, in September, USTR finalized tariffs on $200 billion of Chinese goods.

An article in China Daily predicts that U.S. medical device manufacturers might end up losing $138 million revenues in 2018 as a result of the 25% U.S. tariffs on imported goods from China.

On the flip side, following a trade truce earlier this month, China announced the third round of tariff cuts. Further cuts will also be levied on a wide range of imports, which includes medical diagnosis devices. This is expected to benefit U.S. medical device exports as well.

This is likely to favor MedTech giant Varian Medical over the long haul since it has significant global presence in countries like China, Kenya, Brazil and India.

Price Performance

Reflective of this turbulent backdrop, the Medical Instruments industry declined 2.6% in a year’s time. Shares of Varian Medical have lost 3.6%, comparing unfavorably with the industry.

 

 

Zacks Rank & Stocks to Consider

Varian Medical currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space are Veeva Systems Inc. (VEEV - Free Report) , Integer Holdings Corporation (ITGR - Free Report) and OPKO Health, Inc. (OPK - Free Report) .

Veeva Systems’ long-term earnings growth rate is projected at 19.5%. The stock currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Integer projects earnings growth rate of 31.2% for the fourth quarter. It currently carries a Zacks Rank #2 (Buy).

OPKO Health’s long-term earnings growth rate is projected at 12%. The stock presently sports a Zacks Rank of 1.

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