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Omnicell (OMCL) Rides on New Buyout, Innovation Amid Pandemic

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Omnicell, Inc.’s (OMCL - Free Report) focus on innovation and efforts to expand into new markets seem strategic. However, a tough competitive landscape is a dampener. Currently, Omnicell carries a Zacks Rank #2 (Buy).

Over the past year, Omnicell’s shares have outperformed the industry it belongs to. The stock has rallied 112.6% against the industry’s 13.9% decline.

Omnicell exited the second quarter of 2021 with better-than-expected revenues and earnings. The top line rose year over year on growth across both the operating segments. Second-quarter revenues were up 37% year over year and also exceeded the company’s guidance. The sequential revenue improvement reflected continued momentum in the commercial business and strong customer implementations. 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 company recently announced its intent to acquire FDS Amplicare in an effort to strengthen its Advanced Services portfolio, which continues to gain momentum in the market. The raised adjusted EPS guidance for 2021 also buoys optimism.

The company has also 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. In line with this, EnlivenHealth, a division of Omnicell recently launched personalized interactive voice response, a SaaS technology solution that automates patient communications and frees up pharmacists to spend more quality time with patients. The company currently forecasts 50% CAGR in advanced services from 2020 through 2025.

Omnicell is on track to achieve its 2025 targets driven by a number of factors, including improved business mix, benefits from long-term exclusive customer partnerships, economies of scale, manufacturing savings and process efficiencies.

On the flip side, the coronavirus pandemic has impacted the company’s results with slowdown in product bookings. Further, escalating costs and expenses are putting 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 expense too escalated 28.5% year over year.

Key Picks

A few other top-ranked stocks from the broader medical space are Envista Holdings Corporation (NVST - Free Report) , BellRing Brands, Inc. (BRBR - Free Report) and Bio-Rad Laboratories, Inc. (BIO - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.

Envista Holdings has an estimated long-term earnings growth rate of 27%.

BellRing Brands has an estimated long-term earnings growth rate of 29%.

Bio-Rad has a projected long-term earnings growth rate of 35%.