Back to top

Here's Why You Should Hold Varian Medical (VAR) Stock Now

Read MoreHide Full Article

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).

Shares Up

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.

Key Picks

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%.

Today's Stocks from Zacks' Hottest Strategies

It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.

And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.

See Them Free>>



More from Zacks Analyst Blog

You May Like

Published in