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Omnicell Advances on Global Footing Despite Severe Rivalry

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Omnicell, Inc. (OMCL - Free Report) has laid an emphasis on its strategy of further deepening its roots in the new markets. This tactical move has so far been driving significant growth in the Non-Acute Care segment. However, a tough competitive landscape is a dampener.

This developer and marketer of end-to-end automation solutions for the medication-use process has outperformed its industry over the past year. The stock has gained 14% against the industry’s 3.7% fall.

Significantly, Omnicell is efficiently executing its earlier-announced Autonomous Pharmacy vision, banking on solid growth in sales of its core XR2 Central Pharmacy robotic dispensing system and the IVX Workflow products. The company consistently saw sturdy segmental contributions through the second quarter.

Moreover, Omnicell inked various deals for both the XR2 and the IVX Workflow products. We are encouraged to note that the company is working on product innovation through R&D. Moving ahead, Omnicell is expected to gain from new products, partnerships and digital transformation. An upbeat 2019 guidance is indicative of this strong growth trend to continue through the rest of the year.

Outside the United States, healthcare providers are increasingly becoming aware of the benefits of automation. Additionally, there is substantial demand for adherence to packaging equipment beyond the domestic market. Given that the penetration level in the international market is even less than 1% with a very few hospitals adopting medication control systems, Omnicell is rapidly foraying into fresh global markets.

This stance so far is boosting substantial progress in the Non-Acute Care segment of Omnicell. Albeit the company constantly targets the Middle East and South Africa, it still sees greater adoption of technologies in other parts of the world like Australia, the United Kingdom, parts of Asia, Germany and France.

Internationally, the company announced its first IV robotics deal and made inroads into the South Korean market with several hospital locations.

We are also upbeat about the company’s advancement through acquisitions and partnerships. Among a few partnership pacts signed by the company in the second quarter is that with Spartanburg Regional Healthcare System. It is an integrated healthcare delivery network in South and North Carolina, which has selected Omnicell Solutions for flagship research. The company has also forged an alliance with MUSC Health, which will be implementing its Robotic IV Insourcing Solution to integrate sterile compounding in-house into the health system central pharmacy operation.

Meanwhile, Omnicell faces intense competition in the medication management and supply chain solutions market. Stiff rivalry could induce pricing pressure and a depressed margin might affect the company’s performance in turn.

Also, the company is perennially grappled with escalating costs. It also anticipates persistent higher costs in the upcoming quarters, thanks to new acquisitions and expenses related to the recently-launched XT series and IV workflow.

Zacks Rank & Key Picks

The stock carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader medical space are Stryker (SYK - Free Report) , NuVasive (NUVA - Free Report) and Amedisys (AMED - Free Report) , each carrying a Zacks Rank #2 (Buy).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stryker’s long-term earnings growth rate is expected to be 10.04%.

NuVasive’s long-term earnings growth rate is projected at 7.32%.

Amedisys’ long-term earnings growth rate is estimated to be 16.26%.

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