Varian Medical At A 52-Week High: What's Driving The Stock?

Share price of Varian Medical Systems Inc. (NYSE:VAR) , headquartered in Palo Alto, CA, scaled a new 52-week high of $97.96 on May 26, eventually closing a bit lower at $97.87. The company has gained 18.2% over the past one year, ahead of the S&P 500’s 15.3% gain.

Average volume of shares traded over the last one year was remarkable at approximately 744.9K. The stock has a market cap of $8.99 billion.

Comparison with Broader Industry

For the last three months, the company’s share price has consistently outperformed the Zacks categorized Medical - Instruments sub-industry. The stock has rallied 14.4% over this period, outshining the sub-industry’s gain of 6.2%. The company’s five-year historical growth rate is also favorable at 6.6%, as compared with 2.8% of the S&P 500 index.

Taking the stable performance of the stock into consideration, we expect Varian Medical to gain more ground in the coming quarters.

Estimate Revision Trend

This Zacks Rank #3 (Hold) company’s estimate revision trend for the current year is encouraging. In the past 30 days, two estimates have moved up with no movement in the opposite direction. The magnitude of estimate revision over the same time period increased around 3.9% to $3.98 per share.

Catalysts

The market is upbeat about its 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 has recently received Shonin in Japan to market the ProBeam system for proton therapy. Varian's ProBeam system is the first to offer fully-integrated intensity modulated proton therapy (IMPT).

This apart, Varian Medical recently entered into an international agreement concerning its Proton therapy platform. Bangkok-based King Chulalongkorn Memorial Hospital has selected ProBeam Compact single-room proton therapy system, a fully rotational intensity modulated proton therapy platform for cancer treatment in Thailand.

Among other growth catalysts, the company is also hopeful about the approximate $1 billion revenue opportunity in its Oncology and Imaging Component products over the next five years. The varied offerings include TrueBeam and Edge platforms, InSightive Analytics, Qumulate QA and RapidPlan knowledge-based treatment planning. We believe that Varian Medical’s innovative product pipeline will continue to remain a key growth catalyst over the near and long term.

Key Picks

A few better-ranked stocks in the broader medical sector are Luminex Corporation (NASDAQ:LMNX) , Inogen, Inc. (NASDAQ:INGN) and Edwards Lifesciences Corporation (NYSE:EW) . Notably, Luminex and Inogen sport a Zacks Rank #1 (Strong Buy), while Edwards Lifesciences carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Luminex has an expected long-term adjusted earnings growth of almost 16.3%. The stock added roughly 8.9% over the last three months.

Inogen has a long-term expected earnings growth rate of 17.5%. The stock has a solid one-year return of roughly 84.2%.

Edwards Lifesciences has a long-term expected earnings growth rate of 15.2%. The stock added roughly 22% over the last three months.

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