Omnicell's (OMCL) Portfolio Expansion Aids Amid Macro Woes
Omnicell OMCL is gaining from the expansion of advanced services solutions and prudent cost management. 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 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 2020, the company 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 launch of Inventory Optimization Service (formerly Omnicell One) and Central Pharmacy Dispensing Services. In the third quarter of 2023, several of the company’s health system partners extended their sole-source agreements, including a Florida-based health system, which plans to replace its existing point-of-care footprint with Omnicell XT systems. One of Georgia's largest healthcare networks has contracted Omnicell's inventory optimization service to help strengthen its pharmacy supply chain.
Omnicell, Inc. Price
Omnicell, Inc. price | Omnicell, Inc. Quote
Earlier in 2023, a major southern health system customer expanded the service to nearly 20 hospitals across its health system for increased digitization, visibility and insights. Omnicell’s recently-acquired ReCept has been rebranded as Omnicell specialty pharmacy services and was introduced to the market in late 2022. In 2023, the company’s focus has been on integrating customer success functions into its broader organizational structure.
On the flip side, similar to its healthcare system partners, the company’s operations continue to be affected by persisting labor shortages as well as increased inflationary costs related to components’ raw materials and freight.
In the third quarter of 2023, 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 full-year 2023, management anticipates the cost-savings measures to be partially offset by year-over-year increases in compensation and vendor price increases.
Further, 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 relationships with 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.
Over the past year, shares of Omnicell have declined 38.3% against the industry’s 14% growth.
Key Picks
Some better-ranked stocks in the broader medical space are Insulet PODD, Haemonetics HAE and DexCom DXCM. While Insulet presently sports a Zacks Rank #1 (Strong Buy), Haemonetics and DexCom each carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Estimates for Insulet’s 2023 earnings per share have increased from $1.61 to $1.90 in the past 30 days. Shares of the company have decreased 41.6% in the past year compared with the industry’s decline of 6.7%.
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%.
Haemonetics’ stock has risen 13.2% in the past year. Estimates for Haemonetics’s 2023 earnings have increased from $3.82 to $3.86 in the past 30 days, while the same for 2024 have increased from $4.07 to $4.11.
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 $1.23 to $1.41 in the past 30 days. Shares of the company have fallen 9.4% in the past year compared with the industry’s decline of 7.2%.
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%.
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
