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Why Hold Strategy is Apt for Varian Medical (VAR) Stock Now
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Varian Medical Systems, Inc. is likely to gain from solid prospects of its core Oncology Systems segment and the Proton therapy unit. However, intense competition is expected to offset the positives to some extent.
Shares of this company have surged 44.2% compared with the industry’s 15.6% growth in the past three months.
This $15.74-billion medical technology company currently has a Zacks Rank #3 (Hold). Varian Medical’s earnings are expected to grow 8% in the next five years. Also, the company has a trailing four-quarter earnings surprise of 9.7%, on average.
Let’s take a closer look at the factors that are working in favor of the company right now.
Notable Developments in Proton Therapy: In recent times, Varian saw a significant progress in its core Proton therapy unit, which belongs to its Particle Therapy business.
At the end of the first-quarter of fiscal 2020, Varian was selected by China Medical University Hospital in Taiwan to install a ProBeam 360° system, ARIA information management system and the Eclipse treatment planning system, all scheduled for completion in 2024.
In the fiscal third quarter, revenues at the Proton Solutions segment rose 6%, driven by consistent growth in services revenues.
Solid Oncology Segment: Oncology Systems is Varian Medical’s largest operating business segment and has been driving the company’s top line consistently.
In May 2020, the company launched features for its Noona software application, a powerful tool developed to engage cancer patients in their continuous reporting and symptom monitoring processes. Noona offers cancer care teams an array of in-app features, such as patient screening, real-time symptom reporting, secure care team messaging, telephone triage workflow automation and patient access to medical records, thereby helping them with the new short and long-term healthcare changes resulting from the coronavirus pandemic. This development, which is in response to the challenges posed by the pandemic, is expected to boost Varian’s Oncology segment.
Machine-Learning Capabilities With RapidPlan: Machine learning or AI has been taking the MedTech industry by storm.
In March 2020, Varian announced the latest release of its treatment planning system, Eclipse v16. This new release comprises intelligent features, namely RapidPlan PT, the first clinical application of machine learning in proton treatment planning. The company is expected to continue gaining in the long term from the launch of the RapidPlan.
Deterrents
Cutthroat Competition: Varian competes with large electronic companies like Siemens and Philips as well as smaller and more specialized radiation therapy equipment manufacturers like Elekta, Accuray, Philips, Medtronic and Stryker.
In the emerging proton therapy market, the company faces fierce competition from Hitachi, Ion Beam Applications, Mevion Medical Systems and Sumitomo. Intensifying competition is expected to increase R&D expenditures in the nascent proton therapy market, which will keep margins under pressure. Moreover, pricing pressure in traditional radiotherapy remains a major concern.
Gloomy Projection
For fiscal 2020, the Zacks Consensus Estimate for revenues is pegged at $3.10 billion, indicating a decline of 3.9% from the figure reported in last fiscal. For adjusted earnings per share, the same stands at $3.78, suggesting an 18.4% fall from the number recorded in the previous fiscal.
Surmodics’ long-term earnings growth rate is estimated at 10%. The company currently has a Zacks Rank of 2.
Merit Medical Systems’ long-term earnings growth rate is estimated at 11.9%. It is currently Zacks #2 Ranked.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
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Why Hold Strategy is Apt for Varian Medical (VAR) Stock Now
Varian Medical Systems, Inc. is likely to gain from solid prospects of its core Oncology Systems segment and the Proton therapy unit. However, intense competition is expected to offset the positives to some extent.
Shares of this company have surged 44.2% compared with the industry’s 15.6% growth in the past three months.
This $15.74-billion medical technology company currently has a Zacks Rank #3 (Hold). Varian Medical’s earnings are expected to grow 8% in the next five years. Also, the company has a trailing four-quarter earnings surprise of 9.7%, on average.
Let’s take a closer look at the factors that are working in favor of the company right now.
Notable Developments in Proton Therapy: In recent times, Varian saw a significant progress in its core Proton therapy unit, which belongs to its Particle Therapy business.
At the end of the first-quarter of fiscal 2020, Varian was selected by China Medical University Hospital in Taiwan to install a ProBeam 360° system, ARIA information management system and the Eclipse treatment planning system, all scheduled for completion in 2024.
In the fiscal third quarter, revenues at the Proton Solutions segment rose 6%, driven by consistent growth in services revenues.
Solid Oncology Segment: Oncology Systems is Varian Medical’s largest operating business segment and has been driving the company’s top line consistently.
In May 2020, the company launched features for its Noona software application, a powerful tool developed to engage cancer patients in their continuous reporting and symptom monitoring processes. Noona offers cancer care teams an array of in-app features, such as patient screening, real-time symptom reporting, secure care team messaging, telephone triage workflow automation and patient access to medical records, thereby helping them with the new short and long-term healthcare changes resulting from the coronavirus pandemic. This development, which is in response to the challenges posed by the pandemic, is expected to boost Varian’s Oncology segment.
Machine-Learning Capabilities With RapidPlan: Machine learning or AI has been taking the MedTech industry by storm.
In March 2020, Varian announced the latest release of its treatment planning system, Eclipse v16. This new release comprises intelligent features, namely RapidPlan PT, the first clinical application of machine learning in proton treatment planning. The company is expected to continue gaining in the long term from the launch of the RapidPlan.
Deterrents
Cutthroat Competition: Varian competes with large electronic companies like Siemens and Philips as well as smaller and more specialized radiation therapy equipment manufacturers like Elekta, Accuray, Philips, Medtronic and Stryker.
In the emerging proton therapy market, the company faces fierce competition from Hitachi, Ion Beam Applications, Mevion Medical Systems and Sumitomo. Intensifying competition is expected to increase R&D expenditures in the nascent proton therapy market, which will keep margins under pressure. Moreover, pricing pressure in traditional radiotherapy remains a major concern.
Gloomy Projection
For fiscal 2020, the Zacks Consensus Estimate for revenues is pegged at $3.10 billion, indicating a decline of 3.9% from the figure reported in last fiscal. For adjusted earnings per share, the same stands at $3.78, suggesting an 18.4% fall from the number recorded in the previous fiscal.
Key Picks
A few better-ranked stocks from the broader medical space are OPKO Health (OPK - Free Report) , Surmodics (SRDX - Free Report) and Merit Medical Systems (MMSI - Free Report) .
OPKO Health’s long-term earnings growth rate is estimated at 12%. The company presently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Surmodics’ long-term earnings growth rate is estimated at 10%. The company currently has a Zacks Rank of 2.
Merit Medical Systems’ long-term earnings growth rate is estimated at 11.9%. It is currently Zacks #2 Ranked.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>