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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 its strategic acquisitions and partnerships. The raised guidance for 2021 buoys optimism as well. The 2025 roadmap looks encouraging along with the good solvency position.
Over the past year, the Zacks Rank #1 (Strong Buy) stock has gained 119.1% against the 17.9% fall of the industry and 35.1% rise of the S&P 500.
The renowned medical device solutions provider has a market capitalization of $6.79 billion. Its second-quarter 2021 earnings beat the Zacks Consensus Estimate by 21.3%. The company projects 16% growth for the next five years. Further, the company surpassed estimates in the trailing four quarters, the average surprise being 17.74%.
Let’s delve deeper.
Strategic Imperatives to Drive Growth: Omnicell is progressing well with its three-legged strategy that covers market expansion through the delivery of differentiated, innovative solutions; expansion into new markets, primarily outside the United States; and expansion through strategic tie-ups and acquisition of new technologies.
In line with this, the company has accelerated a shift to cloud-based solutions and tech-enabled services through the launches of Omnicell One and Central Pharmacy Dispensing Services. In 2021, the company has seen rapid growth in SaaS, subscription software and tech-enabled services bookings. At the end of the second quarter of 2021, the company has increased the number of long-term sole-source contracts. A top 10 U.S. health system has chosen Omnicell to help it design and implement complex pharmacy workload, and support its journey toward the autonomous pharmacy.
2025 Roadmap Looks Impressive: In terms of its 2025 financial roadmap, Omnicell is targeting a 14% to 15% compounded total annual revenue growth rate from 2021 to 2025. Over the same period, it is targeting an expansion of non-GAAP EBITDA margin from 21% in 2021 to 25% by 2025, representing a margin expansion of approximately 400 basis points (bps). According to the company, its strong position in the market, growing customer base and strategic focus on innovation will help it achieve these goals.
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Raised Guidance: For 2021, Omnicell now expects revenues in the range of $1.10 billion and $1.11 billion, suggesting an improvement from the previously-estimated $1.08-$1.10 billion. Full-year adjusted earnings per share are expected between $3.65 and $3.75 (an improvement from the earlier-provided view of $3.50-$3.70).
However, 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.
Moreover, Omnicell faces stiff 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 4.2% north to $3.71.
The Zacks Consensus Estimate for its third-quarter 2021 revenues is pegged at $283.8 million, suggesting a 32.81% rise from the year-ago reported number.
Image: Bigstock
Here's Why You Should Add Omnicell (OMCL) to Your Portfolio
Omnicell, Inc. (OMCL - Free Report) is well poised for growth backed by its strategic acquisitions and partnerships. The raised guidance for 2021 buoys optimism as well. The 2025 roadmap looks encouraging along with the good solvency position.
Over the past year, the Zacks Rank #1 (Strong Buy) stock has gained 119.1% against the 17.9% fall of the industry and 35.1% rise of the S&P 500.
The renowned medical device solutions provider has a market capitalization of $6.79 billion. Its second-quarter 2021 earnings beat the Zacks Consensus Estimate by 21.3%. The company projects 16% growth for the next five years. Further, the company surpassed estimates in the trailing four quarters, the average surprise being 17.74%.
Let’s delve deeper.
Strategic Imperatives to Drive Growth: Omnicell is progressing well with its three-legged strategy that covers market expansion through the delivery of differentiated, innovative solutions; expansion into new markets, primarily outside the United States; and expansion through strategic tie-ups and acquisition of new technologies.
In line with this, the company has accelerated a shift to cloud-based solutions and tech-enabled services through the launches of Omnicell One and Central Pharmacy Dispensing Services. In 2021, the company has seen rapid growth in SaaS, subscription software and tech-enabled services bookings. At the end of the second quarter of 2021, the company has increased the number of long-term sole-source contracts. A top 10 U.S. health system has chosen Omnicell to help it design and implement complex pharmacy workload, and support its journey toward the autonomous pharmacy.
2025 Roadmap Looks Impressive: In terms of its 2025 financial roadmap, Omnicell is targeting a 14% to 15% compounded total annual revenue growth rate from 2021 to 2025. Over the same period, it is targeting an expansion of non-GAAP EBITDA margin from 21% in 2021 to 25% by 2025, representing a margin expansion of approximately 400 basis points (bps). According to the company, its strong position in the market, growing customer base and strategic focus on innovation will help it achieve these goals.
Raised Guidance: For 2021, Omnicell now expects revenues in the range of $1.10 billion and $1.11 billion, suggesting an improvement from the previously-estimated $1.08-$1.10 billion. Full-year adjusted earnings per share are expected between $3.65 and $3.75 (an improvement from the earlier-provided view of $3.50-$3.70).
However, 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.
Moreover, Omnicell faces stiff 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 4.2% north to $3.71.
The Zacks Consensus Estimate for its 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 are Envista Holdings Corporation (NVST - Free Report) and Biolase, Inc. (BIOL - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of Zacks #1 Rank stocks here.
Envista Holdings has an estimated long-term earnings growth rate of 27%.
Biolase has a projected long-term earnings growth rate of 15%.