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Omnicell (OMCL) Q2 Earnings Miss Estimates, Gross Margin Down

Omnicell, Inc. OMCL reported adjusted earnings per share (EPS) of 84 cents in second-quarter 2022, down 13.4% from the year-ago quarter’s figure of 97 cents. The metric also lagged the Zacks Consensus Estimate by 1.2%.

The adjustments include one-time expenses like share-based compensation, amortization of acquired intangibles, acquisition-related expenses and others.

On a GAAP basis, EPS were 20 cents in the quarter under review, down 53.5% from EPS of 43 cents in the year-ago quarter.

Revenues in Detail

Second-quarter revenues of $331.4 million rose 21.5% year over year on a reported basis. However, the figure missed the Zacks Consensus Estimate by 2.4%.

Segmental Details

On a segmental basis, product revenues rose 18.7% year over year to $233.8 million in the reported quarter.

Service and other revenues climbed 28.7% year over year to $97.6 million.

Operational Update

In the quarter under review, company-adjusted gross profit rose 15.9% to $158.1 million. Company-adjusted gross margin contracted 227 basis points (bps) to 47.7%.

Omnicell, Inc. Price, Consensus and EPS Surprise

 

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

 

Operating expenses were $145.6 million in the second quarter, up 35.6% year over year. Operating profit totaled $12.5 million, reflecting a 56.8% fall from the prior-year quarter. The operating margin in the second quarter contracted 683 bps to 3.8%.

Financial Update

Omnicell exited the second quarter of 2022 with cash and cash equivalents of $244.9 million compared with $265 million at the end of the first quarter of 2022.

Cumulative net cash used in operating activities at the end of the second quarter was $25.5 million, compared with a cumulative net cash inflow of $129.2 million in the year-ago quarter.

Guidance for Q3 & 2022

Omnicell provided its guidance for the third quarter of 2022, taking into consideration expected contributions and integration costs of recent acquisitions and the anticipated impact of the ongoing inflationary environment. The company has also updated its outlook for the full-year 2022.

For the third quarter of 2022, Omnicell expects revenues between $360 million and $366 million. The Zacks Consensus Estimate for the metric is pegged at $361.8 million.

Product revenues are forecast between $261 million and $264 million, while service revenues are projected to be between $99 million and $102 million for the quarter.

Third-quarter adjusted EPS is envisioned in the band of 93 cents and $1.00. The Zacks Consensus Estimate for the same is pegged at $1.08.

For the full year, the company has maintained its product bookings guidance in the range of $1.370-$1.430 billion.

Revenue estimates have also been maintained between $1.385 billion and $1.410 billion. The Zacks Consensus Estimate for the same stands at $1.40 billion.

For 2022, the currently-projected ranges for product and service revenues are $980-$995 million (up from the prior estimated $975-$990 million) and $405-$415 million (down from the prior estimated $410-$420 million), respectively.

The company has reaffirmed its full-year adjusted EPS estimates in the range of $3.85-$4.05. The Zacks Consensus Estimate for the metric is pegged at $3.94.

Our Take

Omnicell delivered substantial revenue growth in the second quarter on a reported basis. The top line was driven by contributions from the company’s operating segments. The continued demand for Omnicell’s medication management solutions is encouraging. The revenue contributions from the recent acquisitions of FDS Amplicare, ReCept and MarkeTouch Media are other tailwinds. The company has reaffirmed its full-year 2022 guidance for revenues and adjusted EPS, instilling optimism. The ongoing integration of the 340B business into the core Omnicell channel and portfolio of products and services seems promising.

However, Omnicell’s earnings and revenues for the second quarter missed the Zacks Consensus Estimate. Contraction in gross margin is discouraging. Mounting operating expenses led to an operating loss in the quarter, placing significant pressure on the bottom line. The persistent inflationary headwinds, primarily due to semiconductor and other components costs, continue to pose challenges.

Zacks Rank and Key Picks

Omnicell currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space that have announced quarterly results are Quest Diagnostics Incorporated DGX, Molina Healthcare, Inc. MOH and Merck & Co. MRK.

Quest Diagnostics, carrying a Zacks Rank #2 (Buy), reported second-quarter 2022 adjusted EPS of $2.36, which beat the Zacks Consensus Estimate by 9.8%. Revenues of $2.45 billion outpaced the consensus mark by 7.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Quest Diagnostics has an earnings yield of 6.9% compared with the industry’s 3.9%. DGX’s earnings surpassed estimates in three of the trailing four quarters and missed the same in one, the average being 12.1%.

Molina Healthcare, having a Zacks Rank #2, reported second-quarter 2022 adjusted EPS of $4.55, which beat the Zacks Consensus Estimate by 4.8%. Revenues of $8.1 billion outpaced the consensus mark by 6.2%.

Molina Healthcare has a long-term estimated growth rate of 16.4%. MOH’s earnings surpassed estimates in the trailing four quarters, the average being 3.2%.

Merck reported second-quarter 2022 adjusted earnings of $1.87 per share, beating the Zacks Consensus Estimate of $1.67. Revenues of $14.6 billion surpassed the Zacks Consensus Estimate by 5.4%. It currently has a Zacks Rank #2.

Merck has a long-term estimated growth rate of 10.1%. MRK’s earnings surpassed estimates in the trailing four quarters, the average surprise being 16.8%.


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