Omnicell's Market Expansion Strong, Margins on a Downswing - Analyst Blog
On June 15, 2015, we issued an updated research report on Omnicell, Inc. OMCL – a healthcare solutions provider that develops and markets end-to-end automation solutions for the medication-use process.
Despite investigation results pertaining to certain whistleblower allegations coming in favor of Omnicell, several class action lawsuits had been commenced on the same in the past. This had naturally hampered the company's reputation for quite some time.
However, recently management announced that, plaintiff Jeffrey Nelson has voluntarily dismissed his action of filing a class action lawsuit on behalf of all Omnicell shareholders who purchased stock between May 2, 2014 and March 2, 2015. According to Omnicell, with this dismissal, no pending class action lawsuits are currently outstanding, following the resolution of Omnicell's whistleblower investigation. So currently there exists no pending lawsuit against Omnicell, unless someone else comes up with any new allegation.
Meanwhile, Omnicell’s progress on its 3-legged strategy of market expansion through delivery of differentiated, innovative solutions; expansion into new markets, primarily outside the U.S.; and expansion through strategic partnerships and acquisition of new technologies is encouraging.
Moreover, the company’s strong market expansion, particularly on the international front, is impressive. Omnicell has consolidated its footprint in Sweden, Germany, U.K. Singapore and China where strong pipeline development is taking place. Recently, the company obtained orders from a new children’s medical center in Australia, a 300-bed specialty hospital incorporating OmniRx medication control systems. Presently, the company’s overseas operations contribute over 20% to total revenue, which we believe is slated to increase with time as management further expands its operations overseas.
On the flip side, Omnicell’s gross margin continues to remain under pressure as the company tries to curb escalating costs. Competitive headwinds and constrained hospital expenditure also pose concern.
Currently, the Zacks Consensus Estimate of EPS for 2015 and 2016 stand at 93 cents and $1.25 per share, respectively.
The stock has a Zacks Rank #4 (Sell).
Key Picks from the Sector
Medical stocks such as Bio-Rad Laboratories, Inc. BIO, Hospira Inc. HSP and Vascular Solutions Inc. VASC are worth a look. All the three stocks carry a Zacks Rank #1 (Strong Buy).
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OMNICELL INC (OMCL): Free Stock Analysis Report
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