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Why You Should Retain Varian (VAR) in Your Portfolio Now

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Varian Medical Systems, Inc. is gaining from lucrative collaborations and a strong Proton Therapy segment. However, tough competition remains a concern.

The company, with a market capitalization of $16.18 billion,is the world’s leading provider of radiotherapy, radiosurgery, proton therapy and brachytherapy for treating cancer and other medical conditions. This currently Zacks Rank #3 (Hold) company has a trailing four-quarter earnings beat of 16.7%, on average.

In the past three months, the stock has gained 0.9% against the industry’s 4.5% decline.

Let’s delve deeper into the factors working in favor of the company.

Lucrative Partnerships and Acquisitions: Varian has been focusing on inorganic growth through its acquisition strategy. In November 2020, the company inked a new $10-million investment and partnership agreement with COTA, Inc., a Boston-based curator of clinical data in oncology. The companies will collaborate to equip cancer clinics with data analytics and decision support tools, using real-world evidence to help guide clinical and operational decisions as well as drive cost-efficient patient outcomes.

In December, the company inked a three-year Memorandum of Understanding (MoU) with Yonsei Cancer Center, Yonsei University Health System, to partner on research and development projects in the field of radiation therapy and oncology. These deals should strengthen the global reach of Varian’s Oncology segment in the long term.

Notable Developments in Proton Therapy: In recent times, Varian has seen notable developments in its core Proton therapy unit, which falls under its Particle Therapy business. In November, the company and the Cincinnati Children's/UC Health Proton Therapy Center announced the beginning of the first clinical trial of FLASH therapy as part of the recently-opened FAST-01 study. In February 2021, the company initiated the installation of the cyclotron and gantry for its ProBeam 360° single-room proton therapy system at Penn Medicine Lancaster General Health's Ann B. Barshinger Cancer Institute. In October 2020, the company announced the receipt of an Investigational Device Exemption (IDE) from the FDA for the first-ever clinical trial of FLASH therapy, an experimental treatment modality delivering radiation therapy at ultra-high dose rates. These developments should boost Varian’s Proton Therapy Solutions segment in the long term.

 

Downside

Cutthroat Competition: Varian competes with large electronic companies such as Siemens and Philips as well as smaller and more specialized radiation therapy equipment manufacturers like Elekta, Accuray, Medtronic and Stryker.

Estimate Trend

For fiscal 2021, the Zacks Consensus Estimate for revenues is pegged at $3.43 billion, indicating a rise of 8.4% from the prior fiscal year’s reported number. The same for earnings stands at $5.05 per share, suggesting growth of 29.2% from the previous fiscal year’s reported figure.

Key Picks

Some better-ranked stocks from the broader medical space are Align Technology (ALGN - Free Report) , Abbott Laboratories (ABT - Free Report) and Hologic (HOLX - Free Report) . While Align Technology currently sports a Zacks Rank #1 (Strong Buy), the other two presently carry a Zacks Rank of 2 (Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

Align Technology has a projected long-term earnings growth rate of 19%.

Abbott has a projected long-term earnings growth rate of 14.1%.

Hologic has an estimated long-term earnings growth rate of 15.4%.

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