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Here's Why Investors Should Retain Omnicell (OMCL) Stock Now
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Omnicell, Inc. (OMCL - Free Report) is well poised for growth in coming quarters owing to its planned geographic expansion. The company recorded better-than-expected results for the fourth quarter of 2022. A strong solvency position is another upside. However, stiff competition and mounting operating expenses raise apprehension.
In the past year, the Zacks Rank #3 (Hold) stock has declined 58.9% compared with a 43.8% fall of the industry and a 14.9% drop of the S&P 500.
The renowned medical device solutions provider has a market capitalization of $2.44 billion. Its fourth-quarter 2022 earnings remarkably beat the Zacks Consensus Estimate by 266.7%. The long-term expected growth rate is estimated at 13.9% compared with the industry’s projection of 18.6%.
Let’s delve deeper
Q4 Upsides: Omnicell ended the fourth quarter of 2022 with better-than-expected earnings and revenues. Adjusted earnings for the quarter exceeded OMCL’s revised guidance (projected between 5 and 15 cents) due to increased revenues, the lower cost of sales, solid expense management and lower performance-based compensations. The quarterly revenues also beat the previous guidance range of $285-295 million, which buoy optimism. The robust market demand for Omnicell’s Advanced Services is also encouraging. The company’s newest launch of Specialty Pharmacy Services is expected to boost its portfolio by providing enhanced clinical and business outcomes for customers across all care settings.
Planned Geographic Expansion Another Upside: Outside the United States, healthcare providers are becoming increasingly aware of the benefits of automation. Additionally, there is a substantial demand for adherence packaging equipment outside the domestic market. Many government and private entities are aware of the progress made over the last several years in the United States and are investing significantly in information technology and automation. Given the fact that the international market is less than 1% penetrated, with very few hospitals adopting medication control systems, Omnicell has specified its second leg of strategies for expanding into new markets.
Image Source: Zacks Investment Research
Internationally, Omnicell continues to gain momentum in Asia with recent medication management, automation and customer increments in Singapore and Japan.
Strong Liquidity, Solvency and Capital Structure: Omnicell exited the fourth quarter of 2022 with cash and cash equivalents of $1 billion compared with $1.09 billion at the end of the third quarter of 2022. Meanwhile, the company did not report any debt on its balance sheet at the end of the fourth quarter. This is good news regarding the company’s solvency position, particularly during the year of economic downturn, when it is majorly facing manufacturing and supply disruptions globally.
Downsides
Escalating Costs and Expenses: Omnicell has adopted several strategies to drive its top line, including portfolio expansion, acquisitions and further penetration in the medication adherence market. The company continues to battle escalating costs. In the fourth quarter, the adjusted gross profit declined 18.4% year over year. The adjusted gross margin contracted 710 basis points (bps) to 40.9%. Operating expenses were up 16.3% year over year. The operating loss in the quarter totaled $38.4 million compared to the operating profit of $11.5 million in the year-ago quarter.
Competitive Landscape: Omnicell faces intense competition in the medication management and supply chain solutions market. Even though the company continues to gain market share from other traditional providers of medication management and supply chain solutions, major players such as Becton Dickinson/CareFusion Corporation, ARxIUM, Cerner Corporation, Talyst, Inc., Emerson Electronic Co., WaveMark Inc.
Estimate Trend
In the past 90 days, the Zacks Consensus Estimate for Omnicell’s 2023 earnings has moved down by 23% to $1.65.
The Zacks Consensus Estimate for 2023 revenues is pegged at $1.17 billion, suggesting a 9.7% fall from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Hologic, Inc. (HOLX - Free Report) , Henry Schein, Inc. (HSIC - Free Report) and Avanos Medical, Inc. (AVNS - Free Report) .
Hologic, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 15.2%. HOLX’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 30.6%.
Hologic has gained 1.7% against the industry’s 17.5% growth in the past year.
Henry Schein, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 8.1%. HSIC’s earnings surpassed estimates in three of the trailing four quarters and matched the same in the other, the average beat being 2.9%.
Henry Schein has lost 12.4% compared with the industry’s 10.9% decline in the past year.
Avanos, carrying a Zacks Rank #2 at present, has an estimated growth rate of 1.8% for 2023. AVNS’ earnings surpassed estimates in all the trailing four quarters, the average beat being 11%.
Avanos has lost 13.7% compared with the industry’s 17.5% decline in the past year.
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Here's Why Investors Should Retain Omnicell (OMCL) Stock Now
Omnicell, Inc. (OMCL - Free Report) is well poised for growth in coming quarters owing to its planned geographic expansion. The company recorded better-than-expected results for the fourth quarter of 2022. A strong solvency position is another upside. However, stiff competition and mounting operating expenses raise apprehension.
In the past year, the Zacks Rank #3 (Hold) stock has declined 58.9% compared with a 43.8% fall of the industry and a 14.9% drop of the S&P 500.
The renowned medical device solutions provider has a market capitalization of $2.44 billion. Its fourth-quarter 2022 earnings remarkably beat the Zacks Consensus Estimate by 266.7%. The long-term expected growth rate is estimated at 13.9% compared with the industry’s projection of 18.6%.
Let’s delve deeper
Q4 Upsides: Omnicell ended the fourth quarter of 2022 with better-than-expected earnings and revenues. Adjusted earnings for the quarter exceeded OMCL’s revised guidance (projected between 5 and 15 cents) due to increased revenues, the lower cost of sales, solid expense management and lower performance-based compensations. The quarterly revenues also beat the previous guidance range of $285-295 million, which buoy optimism. The robust market demand for Omnicell’s Advanced Services is also encouraging. The company’s newest launch of Specialty Pharmacy Services is expected to boost its portfolio by providing enhanced clinical and business outcomes for customers across all care settings.
Planned Geographic Expansion Another Upside: Outside the United States, healthcare providers are becoming increasingly aware of the benefits of automation. Additionally, there is a substantial demand for adherence packaging equipment outside the domestic market. Many government and private entities are aware of the progress made over the last several years in the United States and are investing significantly in information technology and automation. Given the fact that the international market is less than 1% penetrated, with very few hospitals adopting medication control systems, Omnicell has specified its second leg of strategies for expanding into new markets.
Image Source: Zacks Investment Research
Internationally, Omnicell continues to gain momentum in Asia with recent medication management, automation and customer increments in Singapore and Japan.
Strong Liquidity, Solvency and Capital Structure: Omnicell exited the fourth quarter of 2022 with cash and cash equivalents of $1 billion compared with $1.09 billion at the end of the third quarter of 2022. Meanwhile, the company did not report any debt on its balance sheet at the end of the fourth quarter. This is good news regarding the company’s solvency position, particularly during the year of economic downturn, when it is majorly facing manufacturing and supply disruptions globally.
Downsides
Escalating Costs and Expenses: Omnicell has adopted several strategies to drive its top line, including portfolio expansion, acquisitions and further penetration in the medication adherence market. The company continues to battle escalating costs. In the fourth quarter, the adjusted gross profit declined 18.4% year over year. The adjusted gross margin contracted 710 basis points (bps) to 40.9%. Operating expenses were up 16.3% year over year. The operating loss in the quarter totaled $38.4 million compared to the operating profit of $11.5 million in the year-ago quarter.
Competitive Landscape: Omnicell faces intense competition in the medication management and supply chain solutions market. Even though the company continues to gain market share from other traditional providers of medication management and supply chain solutions, major players such as Becton Dickinson/CareFusion Corporation, ARxIUM, Cerner Corporation, Talyst, Inc., Emerson Electronic Co., WaveMark Inc.
Estimate Trend
In the past 90 days, the Zacks Consensus Estimate for Omnicell’s 2023 earnings has moved down by 23% to $1.65.
The Zacks Consensus Estimate for 2023 revenues is pegged at $1.17 billion, suggesting a 9.7% fall from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Hologic, Inc. (HOLX - Free Report) , Henry Schein, Inc. (HSIC - Free Report) and Avanos Medical, Inc. (AVNS - Free Report) .
Hologic, carrying a Zacks Rank #2 (Buy) at present, has an estimated long-term growth rate of 15.2%. HOLX’s earnings surpassed the Zacks Consensus Estimate in all the trailing four quarters, the average beat being 30.6%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Hologic has gained 1.7% against the industry’s 17.5% growth in the past year.
Henry Schein, carrying a Zacks Rank #2 at present, has an estimated long-term growth rate of 8.1%. HSIC’s earnings surpassed estimates in three of the trailing four quarters and matched the same in the other, the average beat being 2.9%.
Henry Schein has lost 12.4% compared with the industry’s 10.9% decline in the past year.
Avanos, carrying a Zacks Rank #2 at present, has an estimated growth rate of 1.8% for 2023. AVNS’ earnings surpassed estimates in all the trailing four quarters, the average beat being 11%.
Avanos has lost 13.7% compared with the industry’s 17.5% decline in the past year.