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Here's Why You Should Add Omnicell (OMCL) To Your Portfolio

Omnicell, Inc. OMCL is well poised for growth in the coming quarters, backed by its strong segmental performance and notable developments in Autonomous Pharmacy. The company exited the third quarter with better-than-expected results. It’s recent acquisition of FDS Amplicare, in an effort to strengthen its Advanced Services portfolio, appears promising. A strong solvency position also bodes well for the company. Omnicell is well on track to achieve its 2025 targets, driven by a number of factors that raise our optimism.

Over the past year, the Zacks Rank #2 (Buy) stock has gained 71.3% compared with 35% fall of the industry and 32.4% rise of the S&P 500.

The renowned medical device solutions provider has a market capitalization of $8.05 billion. Its third-quarter 2021 earnings beat the Zacks Consensus Estimate by 18.7%.

Over the past five years, the company registered earnings growth of 19.6%, ahead of the industry’s 6.1% rise and the S&P 500’s 2.8% increase. The long-term expected growth rate is estimated to be 16% compared with the industry’s growth projection of 20% and the S&P 500’s projected 11.7% growth.

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Let’s delve deeper.

Factors At Play

Q3 Upsides: Omnicell exited the third quarter with better-than-expected revenues and earnings. Growth across both operating segments contributed to the top line. Omnicell added three net new long-term sole source customers in the third quarter, bringing the total to 251 of the top three hundred health systems. The company also became the medication management partner of choice for three prestigious healthcare providers — a major Northeastern Health system of current Omnicell customer, one of the nation's leading children's hospitals and a Texas-based health system. Omnicell’s strong performance in the quarter and year to date is reflective of the robust demand for its medication management and adherence automation solutions. Expansion in both the margins was another upside. The raised adjusted EPS guidance for 2021 also buoys optimism.

2025 Roadmap Looks Impressive: In terms of its 2025 financial roadmap, Omnicell is targeting to reach $1.9 billion to $2 billion in total revenues by 2025 — a 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 bps. According to the company, its strong position in the market, growing customer base and strategic focus on innovation will help it achieve these goals.

Autonomous Pharmacy Model Holds Potential: Omnicell has an elaborate vision for the Autonomous Pharmacy. We are upbeat about the recent introduction of Omnicell One, which utilizes cloud-based data and predictive prescriptive analytics to provide real-time visibility with actionable insights and workflow optimization recommendations. These recommendations are expected to help improve clinical, financial and operational outcomes across the pharmacy supply chain. Another development in autonomous pharmacy is the acquisition of FDS Amplicare in September. With this acquisition, Omnicell's EnlivenHealth division’s offerings have broadened to help pharmacies to measurably improve patient health outcomes, while enabling new clinical services and expanding their growth and profitability opportunities.

Strong Solvency Position: Omnicell exited the third quarter of 2021 with cash and cash equivalents of $482 million. Meanwhile, the quarter-end total debt came at $483 million. Although the third quarter’s total debt was much higher than the corresponding cash and cash equivalent level, the company has no short-term-payable debt on its balance sheet. This is good news in terms of the company’s solvency position, particularly during the time of a global pandemic when it is facing major manufacturing and supply halts globally.


Escalating Costs: Omnicell continues to battle escalating costs arising from its strategies to drive top-line growth, including portfolio expansion, acquisitions and further penetration in the medication adherence market. Also, the company continues to expect higher costs in the upcoming quarters stemming from integration of new acquisitions and the expenses related to the XT series and IV workflow.

Tough Hospital Spending Trends: Hospitals continue to remain cautious with respect to capital spending in the current economic environment. Thus, a resilient hospital capital expenditure environment might adversely affect the adoption of Omnicell’s solutions. Moreover, the reimbursement mix has also affected the endowments income, further affecting hospital spending capabilities. While the company has won some new deals in larger hospitals, the market is still susceptible to the economy and credit conditions.

Estimate Trend

Omnicell has been witnessing a positive estimate revision trend for 2021. Over the past 90 days, the Zacks Consensus Estimate for its earnings has moved north by 2.2% to $3.77.

The Zacks Consensus Estimate for fourth-quarter 2021 revenues is pegged at $310.1 million, suggesting a 24.4% rise from the year-ago reported number.

Key Picks

A few better-ranked stocks in the broader medical space are AMN Healthcare Services, Inc. AMN, GlaxoSmithKline plc GSK and NextGen Healthcare, Inc. NXGN. You can see the complete list of today’s Zacks #1 Rank stocks here.

AMN Healthcare, carrying a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 16.2%. The company surpassed earnings estimates in all of the trailing four quarters, delivering an average surprise of 19.5%.

AMN Healthcare has outperformed its industry over the past year. AMN has gained 91.1% compared with the industry’s 47.5% fall.

GlaxoSmithKline, carrying a Zacks Rank #1, has a long-term earnings growth rate of 5.8%. The company surpassed earnings estimates in three of the trailing four quarters and missed in one, delivering an average surprise of 15.3%.

GlaxoSmithKline has underperformed its industry over the past year. GSK has gained 13.2% compared with the industry’s 19.9% rise.

NextGen, sporting a Zacks Rank #2, has a long-term earnings growth rate of 8.5%. The company surpassed earnings estimates in the trailing four quarters, delivering an average surprise of 16%.

NextGen has outperformed the industry it belongs to in the past year. NXGN has declined 0.3% versus the industry’s 35% fall.

5 Stocks Set to Double

Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2021. Previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>

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
GlaxoSmithKline plc (GSK): Free Stock Analysis Report
Omnicell, Inc. (OMCL): Free Stock Analysis Report
AMN Healthcare Services Inc (AMN): Free Stock Analysis Report
NEXTGEN HEALTHCARE, INC (NXGN): Free Stock Analysis Report
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