Last quarter, the company delivered earnings of $1.04 per share, which beat the Zacks Consensus Estimate of 95 cents. However, adjusted earnings declined from $1.22 in the year-ago period.
Factors at Play
We are upbeat about Varian Medical's oncology business that accounted for around 95% of the company's total revenue in fourth-quarter 2017. Notably, the company has been addressing both the tier 1 and mid-tier markets through its Edge, Truebeam and VitalBeam products and has also been winning international contracts in the oncology space. For the fourth quarter of 2017, Varian expects adjusted earnings per share in the range of $1.15-$1.23. Revenues are expected to increase about 3% on a year-over-year basis.
The company recently launched its FDA-approved product Halcyon, to strengthen foothold in the oncology business. Varian Medical also signed an agreement with Vijametech and UPMC to establish radiation oncology centers in Vietnam. We are also upbeat about Varian's prospects internationally, where it primarily banks on proton therapy as an advanced treatment option for cancer patients. In this regard, we note that Varian Medical recently received Shonin approval in Japan to market the ProBeam system for proton therapy.
Varian Medical recently entered into two international agreements concerning its Proton therapy platform. Bangkok-based King Chulalongkorn Memorial Hospital has selected its ProBeam Compact single-room proton therapy system for cancer treatment in Thailand along with Delray Medical Center in Florida.
We believe Western Europe, China and Africa present significant top-line growth opportunities in the near term. The company is opening offices in Africa and the Middle East, which depicts that it is aware of opportunities in the region. Moreover, Varian Medical's strong product pipeline is a key catalyst.
Nevertheless, increasing local competition is a primary headwind. Unfavorable foreign currency might affect the company's revenues in the to-be-reported quarter. Also, the company is exposed to seasonal demand fluctuations and higher operating expenses pertaining to increased investments targeted toward growth acceleration in geographical expansion and portfolio expansion.
Our proven model does not conclusively show earnings beat for Varian Medical this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Varian Medical currently has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.19. 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 which increases the predictive power of ESP. However, the company's 0.00% ESP makes surprise prediction difficult.
Please note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revision.
Varian Medical Systems, Inc. Price and EPS Surprise
Stocks to Consider
Here are some companies you may consider as our model shows that they have the right combination of elements to post an earnings beat in the upcoming quarter:
Abbott ABT has an Earnings ESP of +0.17% and carries a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .
Align Technology, Inc ALGN has an Earnings ESP of +2.06% and carries a Zacks Rank #3.
Henry Schein, Inc HSIC has an Earnings ESP of +0.33% and carries a Zacks Rank #3.
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