Varian Medical Systems (VAR)
is typical of high-tech medical device stocks. Analysts love its long-term prospects as the wealthier industrialized world ages. However, the medium-term outlook seemed to be weakened by concerns about the future of healthcare funding sources.
Varian Medical Systems designs, manufactures, sells and services equipment and software products for treating cancer with radiotherapy, stereotactic radiotherapy, stereotactic body radiotherapy (SBRT), stereotactic radiosurgery (SRS) and brachytherapy.
The company also designs, manufactures, sells and services x-ray tubes for original equipment manufacturers (OEMs); replacement x-ray tubes; and flat panel digital image detectors for filmless x-ray imaging in medical, dental, veterinary, scientific and industrial applications.
In addition, Varian designs, manufactures, sells and services linear accelerators, digital image detectors, image processing software and image detection products for security and inspection purposes and proton therapy products and systems for cancer treatment.
Varian Medical Systems has a market cap of $6.62 billion in a sector, healthcare equipment and supplies, where the average company size is $4.72 billion. Its trailing 12-month P/E ratio is 16.43 and its five-year projected price-to-earnings-growth (PEG) ratio is 1.39, compared to 1.91 for the sector.
Its projected earnings per share growth for the coming year is 10.19 percent, compared to a sector average of 12.17 percent.
Analysts are generally positive on VAR, with buy or outperform calls from Caris & Company, Dougherty & Co., Jefferies, and Ned Davis Research.
“We recently downgraded VAR shares to hold, from buy, partly on uncertainty and lack of visibility of hospital capital spending budgets. Order rates for VAR's oncology products, other than for the TrueBeam, appear to us to have softened in North America, though they remain strong in Asia,” Standard & Poor’s Equity Research Analysts wrote July 31.
“While we are encouraged by VAR's recently launched advanced x-ray tubes and flat-panel detectors for mammography, we expect capital spending for imaging systems around the globe to be sluggish for a while. On the plus side, we expect its new partnership with Siemens AG to jointly market and represent each other's imaging and radiotherapy products around the globe to enable VAR to expand its marketing reach.”
Varian Medical Systems next reports on Oct. 24.
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