Varian Medical (VAR) To Report Q2 Earnings: What's In Store?

Varian Medical Systems Inc.’s (NYSE:VAR) seond-quarter fiscal 2019 results are scheduled to release on Apr 24, after market close. The company delivered positive earnings surprises in the trailing four quarters, the average beat being 2.2%.

For the quarter to be reported, Varian Medical is expected to gain from strong exposure to global markets and a solid product portfolio.

Which Way Are Estimates Treading?

Currently, the Zacks Consensus Estimate for second-quarter revenues is pegged at $779 million, suggesting a rise of 5.8% from the year-ago reported number. The same for adjusted earnings is pinned at $1.06.

Let’s discuss the factors that are likely to impact Varian Medical’s upcoming quarterly results.

Key Catalysts

Varian Medical enjoys a significant global presence. The company’s revenues in the APAC and EMEA regions have been consistently contributing to the top line owing to increasing adoption of its systems.

Last December, the company received approval from the United States Trade Representative for the exclusion of its flagship Halcyon radiotherapy systems from Section 301 tariffs. Manufactured in China, the Halcyon radiotherapy system was approved by the China National Medical Product Administration in November 2018.

This expands the global availability of Halcyon. Also, the company sees tremendous opportunities in its second-largest market, China, at the moment. Per management, the much-coveted Halcyon is specifically designed for resource constrained markets like China.

Additionally, the Chinese government has announced an increase in the license quota for radiotherapy products.

Coming to EMEA, Varian Medical has been selected by South Africa's largest private radiation oncology provider, Medical Specialist Holdings. With this, the demand for the company’s Linux and Eclipse treatment planning software is expected to shoot up.

Such developments are expected to strongly contribute to the company’s top line in the yet-to-be-reported quarter.

Apart from Halcyon, the HyperArc high definition radiotherapy and proton therapy are expected to be significant growth drivers in the quarter to be reported.

While HyperArc enjoys a strong global presence, proton therapy saw notable worldwide developments of late. Additionally, the company’s machine learning planning software, RapidPlan, is seeing rapid expansion. In fact, Beijing Cancer Hospital has used RapidPlan in recent times.

However, management is apprehensive about the impact of tariffs, which might adversely impact the top line in the second quarter.

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 #2.

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 also have the right combination of elements to post an earnings beat in the to-be-reported quarter.

PerkinElmer (NYSE:PKI) has an Earnings ESP of +2.64% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stryker Corporation (NYSE:SYK) has an Earnings ESP of +0.35% and a Zacks Rank #3.

Cardinal Health (NYSE:CAH) has an Earnings ESP of +1.13% and a Zacks Rank #3.

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