Varian Medical Upped to Buy - Analyst Blog

On Mar 25, Zacks Investment Research upgraded Varian Medical Systems, Inc. VAR to a Zacks Rank #2 (Buy).

Why the Upgrade?

Varian has been witnessing rising earnings estimates on the back of healthy first-quarter fiscal 2014 (ended Dec 27, 2013) results. Moreover, this CA-based developer and manufacturer of medical equipment and software has delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 0.62%. The long-term expected earnings growth rate for this stock is 10.70%.   

Varian reported first-quarter fiscal 2014 results on Jan 22. Adjusted earnings per share came in at 91 cents, beating the Zacks Consensus Estimate of 90 cents by 1.11% and exceeding the company's prior-year earnings by 6%.

Earnings were primarily aided by top-line growth of 5% in the reported quarter, which was driven by continued demand for Oncology services and X-Ray imaging components. Also, a significant improvement of 60 basis points in the quarter's gross margin boosted earnings.   

Based on its healthy progress and effective marketing and operational strategies, the company expects its adjusted earnings per share for fiscal 2014 to be in the range of $4.22–$4.34. Management also believes that total revenue would increase by 6–8% on a year-over-year basis in fiscal 2014.

The Zacks Consensus Estimate for earnings for fiscal 2014 increased 0.2% to $4.29 per share over the last 60 days. The current Zacks Consensus Estimate lies within the guidance range provided by Varian. For fiscal 2015, the Zacks Consensus Estimate rose 0.8% to $4.86 per share over the same time frame.

Other Stocks to Consider

In the Medical Instruments space, Cynosure, Inc. CYNO, Syneron Medical Ltd ELOS and Delcath Systems, Inc. DCTH are performing well. All of them sport a  Zacks Rank #1 (Strong Buy).