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Omnicell (OMCL) Rides on Innovation Despite Cost Concerns

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On Jan 2, we issued an updated research report on Omnicell, Inc. (OMCL - Free Report) . Gains from the company’s recent buyouts make us upbeat while increasing operating expenses are denting its bottom line. The stock carries a Zacks Rank #3 (Hold).

This developer and marketer of end-to-end automation solutions for the medication-use process has outperformed its industry over the past three months. The stock has lost 12.7% compared with the industry’s 15.6% decline.

Notably, Omnicell’s third-quarter 2018 performance was impressive. The company continued to see a solid uptake of Omnicell XT. It also inked various deals for the XR2 and IVX Workflow products. Moreover, bookings and product backlogs rose in the reported quarter. Additionally, we are encouraged to note that the company is working on product innovation through R&D. Also, Omnicell is expected to benefit from launches, partnerships and digital transformation.

Omnicell has been progressing well with its strategy to grow through acquisitions and collaborations. In this regard, the company's most recent buyout is InPharmics, a Mississippi-based technology and services company, which should help the company expand the capabilities of its Performance Center.

The company is witnessing a solid cross-selling momentum within the total product platform and a combined customer base, specifically for the company’s XR2, IV and Performance Center solutions in both the pipeline and the bookings.

Other recent acquisitions include the likes of Surgichem, Carolina-based Ateb Inc., Pennsylvania-based Aesynt, MACH4 Pharma Systems (Germany), InPharmics and Avantec Healthcare (U.K.). 

Omnicell’s strategy to foray into new markets, primarily outside the United States, bodes well. This has so far driven significant growth in the company’s Non-Acute Care segment. While Omnicell consistently focuses on the Middle East and South Africa, it sees a greater adoption of technologies in other parts of the world, the latest being across Australia.

Meanwhile, Omnicell persistently battles against escalating costs. Also, the company is apprehensive about incurring higher costs on integration of new acquisitions and expenses related to the latest launches like XT series and IV workflow.

Also, a dull show by the company's medication adherence business impacted by an unfavorable timing of large robot sales raises a concern.

Key Picks

Some better-ranked stocks in the broader medical space are Veeva Systems (VEEV - Free Report) , Integer Holdings Corporation (ITGR - Free Report) and Surmodics, Inc. (SRDX - Free Report) .

Veeva Systems’ long-term earnings growth rate is estimated at 19.5%. The stock flaunts a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Integer Holdings has a Zacks Rank of 1 and an earnings growth rate of 50.8% for the first quarter of 2019.

Surmodics’ long-term earnings growth rate is projected at 10%. The stock currently carries a Zacks Rank #2 (Buy).

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