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On Mar 1, we issued an updated research report on Omnicell, Inc. OMCL. The company announced its strategy of expanding into new markets. However, a tough competitive landscape is a dampener.
Over the past six months, Omnicell’s shares have outperformed the industry it belongs to. The stock has gained 79.3% compared with the industry’s 12.8% rise.
Omnicell exited the fourth quarter with better-than-expected revenues and earnings. The top line rose year over year and improved sequentially. The improvement in Service and other revenues despite the pandemic-led business challenges is impressive.
Overall, the company’s optimism about the gradual resumption of elective surgeries and some on-site sales activities in regions less impacted by the pandemic is encouraging. The company is progressing in autonomous pharmacy by expanding its portfolio and investing in the digital cloud-based platform. On the assumption that its customers have resumed their pre-COVID purchasing patterns, the company provided its product bookings guidance for 2021.
Omnicell is progressing well with its three-legged strategy that covers market expansion through delivery of differentiated, innovative solutions; expansion into new markets, primarily outside the United States; and expansion through strategic partnerships and acquisition of new technologies.
In this line, in 2020, the company expanded its autonomous pharmacy portfolio with the strategic and accretive acquisition of PSG's 340B Link business now called Omnicell 340B. The company has also accelerated shift to cloud-based solutions and tech-enabled services through the launches of Omnicell One and Central Pharmacy Dispensing Services. This year, the company has seen rapid growth in SaaS, subscription software and tech-enabled services bookings.
Omnicell, Inc. Price
Omnicell, Inc. price | Omnicell, Inc. Quote
In terms of its 2025 financial roadmap, Omnicell is targeting 14% to 15% compounded total annual revenue growth rate from 2021 to 2025. Over the same period of time, 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. According to the company, its strong position in the market, growing customer base and strategic focus on innovation will help it to achieve these goals.
On the flip side, the coronavirus pandemic has been wreaking havoc on the economy and the impact on Omnicell has been damaging as well. The company noted that it is witnessing significantly lower product bookings as well as slowdown in purchasing decisions by hospitals. The pandemic has impacted the company’s 2020 results with slowdown in product bookings.
Shelter-in-place was enforced throughout the United States and parts of Europe, elective surgeries postponed and hospital systems were ramped up to treat COVID-19 patients. As a result, the company’s sales teams had some difficulty engaging with customers on new bookings, also some implementations from backlog were being delayed as hospitals were consumed with treating COVID-19 patients or were preparing for a potential surge in COVID-19 patient hospital admissions. Omnicell expects to see lower product bookings and revenues through the rest of 2020 compared with management’s expectations prior to the COVID-19 outbreak.
Zacks Rank & Key Picks
The stock carries a Zacks Rank #3 (Hold).
A few better-ranked stocks from the broader medical space are Meridian Biosciences Inc. VIVO, Owens & Minor, Inc. OMI and Envista Holdings Corporation NVST, each carrying a Zacks Rank #1 (Strong Buy). You can seethe complete list of Zacks #1 Rank stocks here.
Meridian Biosciences has a projected long-term earnings growth rate of 61%.
Owens & Minor has a projected long-term earnings growth rate of 45%.
Envista has an expected long-term earnings growth rate of 24%.
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Omnicell, Inc. (OMCL) : Free Stock Analysis Report
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