Omnicell's (OMCL) Global Expansion Strong, Macro Issues Ail
Omnicell’s OMCL geographic expansion and portfolio development aid growth. However, persistent inflationary pressures pose a threat to Omnicell’s cost-saving actions. The stock carries a Zacks Rank #3 (Hold).
Omnicell is progressing well with its three-legged strategy that covers market expansion through the delivery of differentiated, innovative solutions, expansion into new markets, primarily outside the United States, and expansion through strategic partnerships and the acquisition of new technologies.
In this line, the company earlier expanded its autonomous pharmacy portfolio with the strategic and accretive acquisition of PSG's 340B Link business, now called Omnicell 340B. 340B is a significant part of an increasingly complex pharmacy supply chain, requiring solutions designed to help providers manage compliance and reporting while capturing drug cost savings.
Omnicell has also accelerated a shift to cloud-based solutions and tech-enabled services through the launches of Inventory Optimization Service (formerly Omnicell One) and Central Pharmacy Dispensing Services. In the third quarter of 2023, several of OMCL’s health system partners extended their sole-source agreements, including a Florida-based health system that plans to replace its existing point-of-care footprint with Omnicell XT systems. One of Georgia's largest healthcare networks has contracted for Omnicell's inventory optimization service to help strengthen its pharmacy supply chain.
Omnicell, Inc. Price
Omnicell, Inc. price | Omnicell, Inc. Quote
In terms of its 2025 financial roadmap, Omnicell is targeting to reach 1.9 billion to 2 billion of revenues by 2025 — a 14% to 15% compounded total annual revenue growth rate from 2021 to 2025. Over the same period, it is also targeting an expansion of the non-GAAP EBITDA margin from 21% in 2021 to 25% by 2025, representing a margin expansion of approximately 400 bps.
The company is well-positioned to deliver on the 2025 total revenue growth targets, driven by factors like growing its tech service revenues, the benefits of long-term sole source customer partnerships, multi-year co-development plans and increased average deal sizes.
Further, given the fact that the international market is less than 1% penetrated, with very few hospitals adopting medication control systems, Omnicell has specified its second leg of strategies for expanding into new markets. In the first half of 2023, the company’s international sales represented 12% of the total sales.
Meanwhile, Omnicell has 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 basis points. The operating profit also decreased 79.9% compared to the third quarter of 2022. For the full year 2023, management anticipates cost-saving measures to be partially offset by year-over-year increases in compensation and vendor price increases.
Omnicell’s operations are subjected to continued and increased competition from current and future competitors in the medication management automation solution market and the medication adherence solution market, including price competition, industry and competitor consolidation, competitor brand recognition and in terms of relationships with suppliers and current and potential customers. This increased competition could result in pricing pressure and a reduced margin, which may have an adverse impact on the company’s performance.
Key Picks
Some better-ranked stocks in the broader medical space are Haemonetics HAE, DexCom DXCM and Insulet PODD. Haemonetics and DexCom each presently carry a Zacks Rank #2 (Buy), and Insulet sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Haemonetics’ stock has decreased 0.5% in the past year. Earnings estimates for Haemonetics have increased from $3.82 to $3.89 in 2023 and $4.07 to $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 DexCom’s 2023 earnings per share have increased from $1.39 to $1.43 in the past 30 days. Shares of the company have increased 0.1% in the past year compared to the industry’s decline of 4.7%.
DXCM’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 36.4%. In the last reported quarter, it delivered an average earnings surprise of 47.1%.
Estimates for Insulet’s 2023 earnings per share have increased from $1.61 to $1.91 in the past 30 days. Shares of the company have dropped 36.5% in the past year compared with the industry’s decline of 3.3%.
PODD’s earnings surpassed estimates in all the trailing four quarters, the average surprise being 105.1%. In the last reported quarter, it delivered an average earnings surprise of 77.4%.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Omnicell, Inc. (OMCL) : Free Stock Analysis Report
Haemonetics Corporation (HAE) : Free Stock Analysis Report
DexCom, Inc. (DXCM) : Free Stock Analysis Report
Insulet Corporation (PODD) : Free Stock Analysis Report
