Here's Why You Should Retain Omnicell (OMCL) Stock Now
Omnicell OMCL is well-poised for growth in the coming quarters, backed by the execution of its vision to transform the pharmacy care delivery model and deliver mission-critical medication management solutions for customers globally. The company is closely managing the cost structure with several initiatives, which are set to benefit its key metrics.
Macroeconomic headwinds are resisting the full impact of expense containment efforts.
In the past three months, this Zacks Rank #3 (Hold) stock has declined 21.6% against a 6.4% rise of the industry and 7.8% growth of the S&P 500 composite.
The renowned healthcare technology company has a market capitalization of $1.50 billion. Omnicell surpassed estimates in all the trailing four quarters, delivering an average negative earnings surprise of 216.3%.
Let’s delve deeper.
Tailwinds
2025 Roadmap Looks Impressive: In terms of its 2025 financial roadmap, Omnicell is targeting to reach $1.9-$2 billion of revenues by 2025 — witnessing a 14-15% compounded total annual revenue growth rate from 2021 to 2025. Over the same period, it is also targeting an expansion of non-GAAP EBITDA margin from 21% in 2021 to 25% by 2025, representing a margin expansion of approximately 400 basis points (bps). The company is well-positioned to deliver on the 2025 total revenue growth targets, driven by factors like growing its tech services revenue, benefits from long-term sole source customer partnerships, multi-year co-development plans and increased average deal sizes.
Autonomous Pharmacy Model Holds Potential: Autonomous pharmacy is Omnicell’s vision to develop a zero-error, fully automated digital medication and supply management delivery platform that will enable pharmacists, nurses and other clinicians to focus more on patients and less on nonclinical and administrative tasks.
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In the third quarter, the company introduced digital medication guides designed to digitize medication and vaccine information sheets. The solution resonated well with customers, gathering significant interest. As health systems extend pharmacy care beyond the four walls of the hospital, Omnicell is focused on expanding the solutions and creating value in outpatient settings.
Planned Geographic Expansion Another Upside: Outside the United States, healthcare providers are becoming increasingly aware of the benefits of automation. Also, there is a substantial demand for adherence packaging equipment outside the domestic market. Given the fact that the international market is less than 1% penetrated — with very few hospitals adopting medication control systems — Omnicell specified its second leg of strategies for expanding into new markets. In the first half of 2023, the company’s international sales contributed 12% to total sales.
Downsides
Escalating Expenses May Strain Margins: Omnicell adopted several strategies to drive its top line, including portfolio expansion, acquisitions and further penetration in the medication adherence market. Similar to its healthcare system partners, the company’s operations continue to be affected by persisting labor shortages and increased inflationary costs related to components’ raw materials and freight.
In the third quarter of 2023, the gross profit declined 17.1%, resulting in a year-over-year contraction in the gross margin of 152 bps.
Competitive Landscape: Omnicell’s operations are subjected to continued and increased competition from current and future competitors in the medication management automation solutions market and the medication adherence solutions market, including price competition, industry and competitor consolidation, competitor brand recognition and in terms of relationships with the suppliers and current and potential customers. This increased competition could result in pricing pressure and a reduced margin, which would have an adverse impact on the company’s performance.
Estimate Trend
The Zacks Consensus Estimate for OMCL’s 2023 earnings per share has remained constant at $1.75 in the past 30 days.
The Zacks Consensus Estimate for the company’s 2023 revenues is pegged at $1.14 billion. This suggests an 11.7% fall from the year-ago reported number.
Key Picks
Some better-ranked stocks in the broader medical space are Haemonetics HAE, DaVita DVA and HealthEquity HQY . Haemonetics and HealthEquity each presently carry a Zacks Rank #2 (Buy), and DaVita sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Haemonetics’ stock has increased 8.7% in the past year. Earnings estimates for Haemonetics have remained constant at $3.89 in 2023 and at $4.15 in 2024 in the past 30 days.
HAE’s earnings beat estimates in each of the trailing four quarters, delivering an average surprise of 16.1%. In the last reported quarter, it posted an earnings surprise of 5.3%.
Estimates for DaVita’s 2023 earnings per share have remained constant at $8.07 in the past 30 days. Shares of the company have increased 36.5% in the past year compared with the industry’s rise of 10%.
DVA’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 36.6%. In the last reported quarter, it delivered an average earnings surprise of 48.4%.
Estimates for HealthEquity’s 2023 earnings per share have increased from $2.03 to $2.15 in the past 30 days. Shares of the company have increased 12.1% in the past year against the industry’s 2.1% fall.
HQY’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 16.5%. In the last reported quarter, it delivered an average earnings surprise of 22.5%.
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DaVita Inc. (DVA) : Free Stock Analysis Report
Omnicell, Inc. (OMCL) : Free Stock Analysis Report
Haemonetics Corporation (HAE) : Free Stock Analysis Report
HealthEquity, Inc. (HQY) : Free Stock Analysis Report
