Back to top

Image: Bigstock

Omnicell (OMCL) Rides on Global Expansion, Strategic R&Ds

Read MoreHide Full Article

On Nov 22, we issued an updated research report on Omnicell, Inc. (OMCL - Free Report) .  The company announced its strategy of expanding into 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.

Shares of this developer and marketer of end-to-end automation solutions for the medication-use process have outperformed its industry over the past three months. The stock has gained 11.7% compared with the industry’s 1.3% growth.

Notably, Omnicell put up a solid show in the third quarter with better-than-expected adjusted earnings. The top line also registered strong year-over-year growth and solid segmental contributions. Currently, the company is working on product innovation through R&D. Moving ahead, product launches and digital transformation might add capabilities to its portfolio.

Omnicell renewed and expanded its agreement with Vizient for the advancement of its products. The expansion of gross and operating margins in the reported quarter is encouraging as well. Moreover, an upbeat 2019 guidance indicates that this robust trend will continue for the rest of the year.

We are encouraged by the company’s diligent focus on innovating products via R&D. Throughout 2019 and beyond, Omnicell expects consistent growth in the pipeline, bookings and live XT frames.

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

This stance so far is fueling enormous growth for the Non-Acute Care segment of Omnicell. Albeit the company steadily targets the Middle East and South Africa, it sees greater uptake of technologies in other parts of the world like Australia, the United Kingdom, parts of Asia, Germany and France.

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

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

Also, the company persistently battles against escalating costs. It continues to anticipate 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 #2 (Buy). Some other top-ranked stocks from the broader medical space are Haemonetics Corporation (HAE - Free Report) , National Vision Holdings, Inc (EYE - Free Report) and ResMed Inc (RMD - Free Report) .

Haemonetics has a Zacks Rank #1 (Strong Buy) and a projected long-term earnings growth rate of 13.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.

National Vision’s long-term earnings growth rate is estimated at 17.8%. The company currently has a Zacks Rank of 2.

ResMed’s long-term earnings growth rate is estimated at 12.9%. It is currently a Zacks #2 Ranked player.

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through Q3 2019, while the S&P 500 gained +39.6%, five of our strategies returned +51.8%, +57.5%, +96.9%, +119.0%, and even +158.9%.

This outperformance has not just been a recent phenomenon. From 2000 – Q3 2019, while the S&P averaged +5.6% per year, our top strategies averaged up to +54.1% per year.

See their latest picks free >>