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What's in Store for Varian Medical (VAR) in Q3 Earnings?

Zacks Equity Research

Varian Medical Systems, Inc.’s VAR third-quarter fiscal 2019 results are scheduled to release on Jul 24, after market close. In the last reported quarter, the company reported a negative earnings surprise of 9.5%. Further, it has an average four-quarter negative surprise of 2.3%.

Let’s take a look at how things are shaping up prior to this announcement.

Which Way Are Estimates Treading?

Currently, the Zacks Consensus Estimate for third-quarter revenues is pegged at $760.2 million, suggesting growth of 7.2% from the year-ago reported number. The same for adjusted earnings stands at $1.14, indicating an improvement of 9.6% from the year-ago quarter.

Varian Medical Systems, Inc. Price and EPS Surprise

 

Varian Medical Systems, Inc. Price and EPS Surprise

Varian Medical Systems, Inc. price-eps-surprise | Varian Medical Systems, Inc. Quote

Key Catalysts

Varian Medical is likely to have witnessed revenue growth in the APAC and EMEA regions in the soon-to-be-reported quarter driven by better-than-expected orders performance in these regions. In fact, probable revenue growth in these regions will drive the company’s top line in the fiscal third quarter.

Moreover, the company’s Halcyon platform is likely to have experienced robust performance in the to-be reported quarter. Apart from this, the HyperArc high definition radiotherapy and proton therapy are expected to aid the upcoming quarterly results.

Varian Medical’s Oncology Systems segment has likely reported higher revenues in the fiscal third quarter driven by its integrated platform with superior hardware, software and services. Additionally, strength in hardware, software and services and probable strong growth across APAC and EMEA in the to-be-reported quarter might have attributed to the increase in order in the Oncology business, which in turn will aid the results.

Coming to the software front, the company is likely to have witnessed revenue growth in the fiscal third quarter fueled by customer uptake of its new software features.

Varian Medical has raised its revenue guidance to $3.09-$3.18 billion from the previously stated range of $3.06-$3.15 billion, reflecting growth of 6% to 9%. Given the strong outlook, we can expect a repeat of it in the soon-to-be-reported quarter.

Sustained growth in worldwide net installed base is likely to have led to an increase in recurring revenue from software and services in the to-be-reported quarter.

However, the company might have experienced a decline in operating earnings in the fiscal third quarter owing to the impact of tariffs and increased project costs and site delays in the Proton business.

Further, the company is likely to witness contraction in margins due to the higher demand for lower-margin products from China, India and Brazil.

Moreover, Varian Medical anticipates to incur an additional cost of $2 million related to the acceleration of its software deployment capabilities.

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. This is not the case here as you will see below.

Earnings ESP: Varian Medical has an Earnings ESP of 0.00%. 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.

Meanwhile, we caution against stocks with a Zacks Rank #4 (Sell) or 5 (Strong Sell) 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 these have the right combination of elements to post an earnings beat this quarter.

AmerisourceBergen ABC has an Earnings ESP of +0.67% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

DENTSPLY SIRONA XRAY has an Earnings ESP of +6.95% and a Zacks Rank #1.

Acadia Healthcare Company, Inc. ACHC has an Earnings ESP of +4.86% and a Zacks Rank #1.

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Varian Medical Systems, Inc. (VAR) : Free Stock Analysis Report
 
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