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Here's Why You Should Add Omnicell (OMCL) to Your Portfolio
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Omnicell, Inc. (OMCL - Free Report) is well poised for growth backed by a new acquisition plan and strategic imperatives. The company exited the second quarter of 2021 with better-than-expected results. The top line rose year over year on growth across both its operating segments. The upcoming availability of fully Autonomous Pharmacy, Omnicell One, seems strategic. A good solvency position bodes well.
Over the past year, the Zacks Rank #1 (Strong Buy) stock has gained 124.5% against the 19% fall of the industry and 30.9% rise of the S&P 500.
The renowned medical device solutions provider has a market capitalization of $6.64 billion. Its second-quarter 2021 earnings beat the Zacks Consensus Estimate by 21.3%.
Over the past five years, the company registered earnings growth of 19.6%, ahead of the industry’s 6.1% rise and the S&P 500’s 2.8% increase. The long-term expected growth rate is estimated at 12% compared with the industry’s growth projection of 19.3% and the S&P 500’s projected 11.3% growth.
Image Source: Zacks Investment Research
Let’s delve deeper.
Q2 Upsides: Omnicell exited the second quarter with better-than-expected revenues and earnings. The top line rose year over year on growth across both its operating segments. The year-over-year increase was partially attributable to the lower-than-typical year-ago quarter revenue levels due to the COVID-19 pandemic. The acquisition plan of FDS Amplicare seems strategic. The raised adjusted EPS guidance for 2021 is indicative that this growth momentum will continue.
Strategic Imperatives to Drive Growth: Omnicell has exhibited good progress with respect to its three-legged strategy, which involves market expansion through delivery of differentiated, innovative solutions; expansion into new markets, primarily outside the United States; and expansion through strategic partnerships and acquisition of new technologies. At the end of the second quarter of 2021, the company increased the number of long-term sole-source contracts. Notably, one of the top 10 U.S. health companies partnered with Omnicell to help them design and implement complex pharmacy workload, and support their journey toward autonomous pharmacy.
Autonomous Pharmacy Model Holds Potential: Omnicell has an elaborate vision for Autonomous Pharmacy. Per management, the Autonomous Pharmacy vision integrates a comprehensive set of solutions across three key segments — automation solutions, intelligence and automation of medication dispensing workflows. As a major milestone in this niche, Omnicell recently introduced fully Autonomous Pharmacy, Omnicell One, which will be available from August. We are also optimistic about the company’s plans to acquire FDS Amplicare, a pharmacy SaaS solution provider, as announced during July 2021. With this acquisition, Omnicell's EnlivenHealth division will be able to broaden offerings to help pharmacies measurably improve patient health outcomes, while enabling new clinical services and expanding their growth and profitability opportunities.
Strong Solvency: Omnicell exited the second quarter of 2021 with cash and cash equivalents of $614.2 million compared with $615 million at the end of the first quarter. Meanwhile, the company finished the quarter with no debt on its balance sheet. This indicates a strong solvency position.
Downsides
Escalating Costs and Expenses: Omnicell continues to battle escalating costs that are exerting pressure on the company’s bottom line. In the second quarter, cost of product revenues increased 16.8%, while cost of services and other revenues rose 18.3%. Selling, general, and administrative expenses escalated 28.5% year over year.
Competitive Landscape: Omnicell faces significant competition in the medication management and supply chain space from MedTech bigwigs like Becton, Dickinson and Company (BDX - Free Report) . Major direct competitors in the medication packaging solutions market like Drug Package, Inc., AutoMed Technologies, Inc. (a subsidiary of ARxIUM), among others, still pose a threat as they spearhead several expansion programs.
Estimate Trend
Omnicell has been witnessing a positive estimate revision trend for 2021. Over the past 90 days, the Zacks Consensus Estimate for its earnings has moved north by 3.9% to $3.69.
The Zacks Consensus Estimate for third-quarter 2021 revenues is pegged at $283.8 million, suggesting a 32.81% rise from the year-ago reported number.
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Here's Why You Should Add Omnicell (OMCL) to Your Portfolio
Omnicell, Inc. (OMCL - Free Report) is well poised for growth backed by a new acquisition plan and strategic imperatives. The company exited the second quarter of 2021 with better-than-expected results. The top line rose year over year on growth across both its operating segments. The upcoming availability of fully Autonomous Pharmacy, Omnicell One, seems strategic. A good solvency position bodes well.
Over the past year, the Zacks Rank #1 (Strong Buy) stock has gained 124.5% against the 19% fall of the industry and 30.9% rise of the S&P 500.
The renowned medical device solutions provider has a market capitalization of $6.64 billion. Its second-quarter 2021 earnings beat the Zacks Consensus Estimate by 21.3%.
Over the past five years, the company registered earnings growth of 19.6%, ahead of the industry’s 6.1% rise and the S&P 500’s 2.8% increase. The long-term expected growth rate is estimated at 12% compared with the industry’s growth projection of 19.3% and the S&P 500’s projected 11.3% growth.
Image Source: Zacks Investment Research
Let’s delve deeper.
Q2 Upsides: Omnicell exited the second quarter with better-than-expected revenues and earnings. The top line rose year over year on growth across both its operating segments. The year-over-year increase was partially attributable to the lower-than-typical year-ago quarter revenue levels due to the COVID-19 pandemic. The acquisition plan of FDS Amplicare seems strategic. The raised adjusted EPS guidance for 2021 is indicative that this growth momentum will continue.
Strategic Imperatives to Drive Growth: Omnicell has exhibited good progress with respect to its three-legged strategy, which involves market expansion through delivery of differentiated, innovative solutions; expansion into new markets, primarily outside the United States; and expansion through strategic partnerships and acquisition of new technologies. At the end of the second quarter of 2021, the company increased the number of long-term sole-source contracts. Notably, one of the top 10 U.S. health companies partnered with Omnicell to help them design and implement complex pharmacy workload, and support their journey toward autonomous pharmacy.
Autonomous Pharmacy Model Holds Potential: Omnicell has an elaborate vision for Autonomous Pharmacy. Per management, the Autonomous Pharmacy vision integrates a comprehensive set of solutions across three key segments — automation solutions, intelligence and automation of medication dispensing workflows. As a major milestone in this niche, Omnicell recently introduced fully Autonomous Pharmacy, Omnicell One, which will be available from August. We are also optimistic about the company’s plans to acquire FDS Amplicare, a pharmacy SaaS solution provider, as announced during July 2021. With this acquisition, Omnicell's EnlivenHealth division will be able to broaden offerings to help pharmacies measurably improve patient health outcomes, while enabling new clinical services and expanding their growth and profitability opportunities.
Strong Solvency: Omnicell exited the second quarter of 2021 with cash and cash equivalents of $614.2 million compared with $615 million at the end of the first quarter. Meanwhile, the company finished the quarter with no debt on its balance sheet. This indicates a strong solvency position.
Downsides
Escalating Costs and Expenses: Omnicell continues to battle escalating costs that are exerting pressure on the company’s bottom line. In the second quarter, cost of product revenues increased 16.8%, while cost of services and other revenues rose 18.3%. Selling, general, and administrative expenses escalated 28.5% year over year.
Competitive Landscape: Omnicell faces significant competition in the medication management and supply chain space from MedTech bigwigs like Becton, Dickinson and Company (BDX - Free Report) . Major direct competitors in the medication packaging solutions market like Drug Package, Inc., AutoMed Technologies, Inc. (a subsidiary of ARxIUM), among others, still pose a threat as they spearhead several expansion programs.
Estimate Trend
Omnicell has been witnessing a positive estimate revision trend for 2021. Over the past 90 days, the Zacks Consensus Estimate for its earnings has moved north by 3.9% to $3.69.
The Zacks Consensus Estimate for third-quarter 2021 revenues is pegged at $283.8 million, suggesting a 32.81% rise from the year-ago reported number.
Other Key Picks
A few other top-ranked stocks from the broader medical space include Computer Programs and Systems, Inc. and West Pharmaceutical Services, Inc. (WST - Free Report) , each sporting a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Computer Programs and Systems has a long-term earnings growth rate of 14.3%.
West Pharmaceutical has a long-term earnings growth rate of 28.4%.