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Omnicell (OMCL) Q2 Earnings Lag Estimates, Margins Down

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Omnicell, Inc. OMCL reported second-quarter 2020 adjusted earnings per share (EPS) of 37 cents, down 44.8% year over year. The metric lagged the Zacks Consensus Estimate by 13.9%.

The adjustments include expenses related to share-based compensation, amortization of acquired intangibles, and severance and other.

On a GAAP basis, loss per share was 10 cents for the quarter under review compared with EPS of 37 cents in the year-ago quarter.

Revenues in Detail

Second-quarter revenues of $199.6 million dropped 8.2% year over year on a reported basis (same on adjusted basis). The figure, however, beat the Zacks Consensus Estimate by 0.5%.

Omnicell, Inc. Price, Consensus and EPS Surprise

 

Omnicell, Inc. Price, Consensus and EPS Surprise
Omnicell, Inc. Price, Consensus and EPS Surprise

Omnicell, Inc. price-consensus-eps-surprise-chart | Omnicell, Inc. Quote

Segmental Details

On a segmental basis, Product revenues fell 12.3% year over year to $138.9 million in the reported quarter.

Service and other revenues climbed 2.8% year over year to $60.7 million.

With regard to COVID-19 impact on the company’s business, Omnicell noted that it has continued to see a delay in product bookings and expects this slowdown to continue along with the declining revenue trend through the year. However, the company is upbeat about the gradually changing environment, which is recording favorable impact with respect to both product bookings and revenues. Further, the overall level of system implementations is rising.

Additionally, through the second quarter, the company’s scope to access hospitals in order to implement capital equipment has been delayed in many cases, as many hospitals are used for treating coronavirus patients.

Operational Update

In the quarter under review, the company-provided adjusted gross profit declined 16.4% to $89.9 million. Further, adjusted gross margin contracted 440 basis points (bps) to 45%.

Adjusted operating expenses were $74.5 million in the second quarter, down 1.1% year over year. Adjusted operating profit totaled $15.4 million, reflecting a 52.2% fall from the prior-year quarter. Adjusted operating margin in the second quarter contracted 710 bps to 7.7%.

Financial Update

Omnicell exited the second quarter with cash and cash equivalents, and net accounts receivable and unbilled receivables of $322.5 million compared with $337.1 million at the end of the first quarter of 2020.

Cumulative cash flow from operating activities at the end of the second quarter was $72.7 million compared with $53.8 million a year ago.

Guidance

Omnicell is currently unable to gauge the scope, duration and impact of the pandemic and is also uncertain about the timing of global recovery and economic normalization. This time, too, the company was unable to provide the full-year guidance.

However, the company expects third-quarter 2020 adjusted product revenues at $143-$149 million and adjusted service revenues within $61-$63 million.

Adjusted EPS is expected within 44-52 cents for the third quarter. The Zacks Consensus Estimate for the same is currently pegged at 73 cents.

Given the gradually improving business environment, Omnicell anticipates sequential product bookings and revenue growth through the third quarter of 2020. However, management expects disruptions for hospital spending and access for implementations to continue in the near- to medium-term.

Our Take

Omnicell exited the second quarter with better-than-expected revenues and an earnings miss. The top line however plunged year over year. The company recorded disappointing segmental contribution from the Product segment. Contraction of both margins in the reported quarter was discouraging as well. The company’s inability to provide full-year guidance this time as well raises concerns.

However, 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 improvement in Service and other revenues despite the pandemic-led business challenges is impressive.

Zacks Rank and Stocks to Consider

Omnicell currently carries a Zacks Rank #5 (Strong Sell).

Some better-ranked stocks in the broader medical space are West Pharmaceutical Services, Inc. WST, Patterson Companies, Inc. PDCO and Laboratory Corporation of America Holdings LH or LabCorp. All three stocks flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

West Pharmaceutical reported second-quarter 2020 adjusted EPS of $1.25 in contrast to the Zacks Consensus Estimate of a loss of 91 cents. Net revenues of $527.2 million outpaced the consensus estimate by 6.9%.

Patterson reported fourth-quarter fiscal 2020 adjusted EPS of 43 cents, surpassing the Zacks Consensus Estimate by 152.9%. Revenues of $1.29 billion outpaced the consensus mark by 1.9%.

LabCorp reported second-quarter 2020 adjusted EPS of $2.57, surpassing the Zacks Consensus Estimate of 78 cents. Revenues of $2.77 billion outpaced the consensus mark by 14.3%.

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