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Varian (VAR) Scales New 52-Week High on Solid Prospects

Zacks Equity Research

Shares of Varian Medical Systems, Inc. VAR scaled a new 52-week high of $138.35 on Mar 21, closing nominally lower at $137.78. The company has gained 22.4% over the past six months against the industry’s 3.4% decline. The stock also fared better than the S&P 500’s decline of 1.3%.

The company has a market cap of $12.50 billion.

Further, Varian’s estimate revision trend for the current year is favorable. In the past 60 days, two estimates moved up while none shifted down. Consequently, estimates were up 0.21% from $4.69 a share.

The company also has a trailing four-quarter average positive earnings surprise of 2.24%. It also has an impressive long-term growth rate of 8%.

Varian currently holds a Zacks Rank #2 (Buy).

Growth Drivers

Increasing net sales from Oncology Systems and Proton Solutions have been a major growth driver for Varian.


Market seems upbeat about the strong and consistent revenue growth at Oncology Systems over the last two quarters. The segment’s performance was aided by a year-over-year increase in global net installed base. Gross orders of oncology system units surged particularly in the Americas, EMEA and APAC regions. The radiation therapy market has been contributing to this segment’s growth as well.

In the last two quarters, the Proton Solutions segment of Varian witnessed robust growth on several clinical handovers within the United Kingdom. The FlashForward Consortium and ProBeam 360, both launched near 2018-end, have been building momentum within this segment. Continued investment in sales, marketing and R&D within this segment is expected to keep strengthening the company.

Of late, a rising number of orders for the Halcyon radio therapy platform, launched and approved in the fourth quarter of fiscal 2018, have been crucial for the company. The platform was granted exclusion from U.S. tariffs, which is another major positive.

A few months back, Varian announced the acquisition of Noona, a developer of cloud-based technology designed to highlight cancer patient outcomes. Around that time, the Paul Scherrer Institute initiated the use of Varian software solution for advanced proton therapy treatments. Varian also announced that it was selected by Medical Specialist Holdings (MSH) to extend its treatment facilities to seven of its centers in South Africa.

In August 2018, Varian announced the acquisition of humediQ, with the agenda of strengthening its oncology portfolio. It also launched the Bravos brachytherapy afterloader system in order to enhance clinical experience.

We believe all these factors have lifted the stock to a 52-week high.

Other Key Picks

Some other top-ranked stocks in the broader medical space are Abbott Laboratories ABT, Penumbra, Inc., PEN and Masimo, Inc. MASI. Notably, each of these stocks currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Abbott’s long-term earnings growth rate is projected at 11.73%

Penumbra’s long-term earnings growth rate is estimated at 20.93%.

Masimo’s long-term earnings are projected to grow 15.60%.

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