Varian’s Long-Term Growth Strategy: Will It Drive 2018 Guidance?
Varian Medical Systems says it is focused on delivering long-term value to its shareholders and customers. The company has deployed a framework for that across the organization, which is expected to drive an ownership culture that could improve operational efficiencies, investment decisions, and capital allocation. Toward the same goal, Varian says it’s investing continuously in innovation and quality with an aim to achieve operational efficiencies and enhance software and data capabilities. The company says it is focused on establishing itself as a multidisciplinary integrated company offering a comprehensive portfolio of oncology care and management products and services.
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Varian Medical Systems launched a number of key products in fiscal 2017, including Halcyon, Eclipse, HyperArc, and 360 oncology. It’s also expanding across the proton therapy market with 21 customers in 13 countries by the end of fiscal 2017. The company continues to look for opportunities to expand in high growth markets through organic as well as inorganic strategies. Some of its recent investments include Fusion Pharmaceuticals and Grail in the fields of radiotherapeutics and liquid biopsy, respectively.
Fiscal 2018 guidance
Varian Medical Systems expects to see fiscal 2018 revenue growth in the range of 2%–4%. Its adjusted diluted EPS (earnings per share) for fiscal 2018 is expected to be $4.20–$4.32. Operating earnings guidance for fiscal 2018 is expected to be 18%–19% of total sales. It expects cash flows from operations to be $475 million–$550 million in fiscal 2018. Its tax rate is expected to be 23%.
Competitors Boston Scientific (BSX), Accuray (ARAY), and Intuitive Surgical (ISRG) are expected to have sales growth of 7.2%, 3.4%, and 14.1%, respectively, in their next fiscal years. For exposure to Varian Medical Systems and thus reducing the company-specific risks, investors can consider the iShares Russell 1000 Growth (IWF), which has ~0.08% of its total portfolio holdings in VAR.