Varian Medical Systems, Inc. (VAR - Free Report) is expected to benefit from a slew of positive developments and strategic acquisitions. However, the company’s compressed margins raise concern.
The stock currently has a Zacks Rank #3 (Hold).
Over the past year, shares of Varian Medical have rallied 9.8% against the industry’s 0.1% decline. The current level is also better than the S&P 500 index’s 7% decline.
What’s Deterring the Stock?
An intensely competitive industry is likely to keep Varian Medical’s margins under pressure. In fact, in the last reported quarter, the company’s gross margin was 42.3% of net revenues, down 10 basis points (bps) on a year-over-year basis.
Why Should You Retain Varian Medical?
Varian Medical ended 2018 on a positive note. Notably, the company saw a slew of developments.
It is encouraging to note that the California-based MedTech giant received approval from the United States Trade Representative for the exclusion of its flagship Halcyon radiotherapy systems from Section 301 tariffs. (Read More: Varian Medical's Halcyon Excluded From Trade Tariffs)
Additionally, Switzerland-based Paul Scherrer Institute Center for Proton Therapy has begun utilizing the company’s flagship Eclipse treatment planning system for intensity-modulated proton therapy treatments. (Read More: Varian Medical's Eclipse Picked by Paul Scherrer Institute)
Varian Medical’s flagship ProBeam-equipped Emory Proton Therapy Center was recently opened in Georgia which is likely to expand the use of its cancer treatment technologies like proton therapy. (Read More: Varian Medical ProBeam-Equipped Emory Center Opens in Georgia)
The company has also been on an acquisition spree lately.
In 2018, it bought Noona Healthcare, whose patient software app helps capture cancer patient-reported outcomes (PROs) and enable direct communication with patients. (Read More: Varian Buys Noona to Boost Oncology Software Services)
Earlier in 2018, Varian Medical extended its Oncology portfolio with the acquisition of humediQ, the manufacturer of IDENTIFY, a surface-guided radiation therapy positioning and motion management system. (Read More: Varian Acquires humediQ, Boosts Motion Management Portfolio)
Which Way Are Estimates Headed?
For the fiscal first quarter, the Zacks Consensus Estimate for earnings is pegged at $1.06. The same for revenues is pinned at $717.9 million, showing an increase of 5.8% year over year.
For fiscal 2019, the Zacks Consensus Estimate for revenues is at $3.10 billion, reflecting a rise of 6.2% year over year. The same for earnings stands at $4.69, reflecting growth of 6.1% year over year.
A few better-ranked stocks in the broader medical space are Veeva Systems Inc (VEEV - Free Report) , Penumbra, Inc. (PEN - Free Report) and OPKO Health, Inc (OPK - Free Report) . While, Veeva Systems and OPKO Health sport a Zacks Rank #1 (Strong Buy), Penumbra carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Veeva Systems’ long-term earnings growth rate is projected at 19.5%.
Penumbra has a long-term earnings growth rate of 20%.
OPKO Health’s long-term earnings growth rate is projected at 12%.
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