Yahoo Finance Omnicell (OMCL) Gains From New Offerings Amid Cost Woes
Omnicell OMCL has been gaining from the successful execution of its growth strategies. Yet, macroeconomic concerns continue to impede growth. The stock carries a Zacks Rank #3 (Hold) currently.
Omnicell strategizes to offer differentiated, innovative solutions, expand into new markets and grow through strategic partnerships and acquisition of new technologies. The company successfully increased its installed base of Point of Care connected devices through market share gains in the past three years. In 2023, Omnicell launched the XT console upgrade as part of a broader strategy toward a planned XT product refresh. In 2024, the XT platform innovation pipeline will include key product enhancements and services designed to improve medication management.
In terms of its 2025 financial roadmap, Omnicell targets $1.9 billion-$2 billion of revenues by 2025, representing a CAGR of 14%-15% in the 2021-2025 period. Additional targets include a non-GAAP gross margin of 52%-53% and a non-GAAP EBITDA margin of approximately 23%. The company is well-positioned to deliver on the 2025 total revenue growth targets, driven by factors like growing tech services revenues, benefits from long-term sole source customer partnerships, multi-year co-development plans and increased average deal sizes.
In the first quarter of 2024, the company delivered non-GAAP EBITDA of $11 million, above the guidance range of ($2) million and $4 million. Non-GAAP earnings per share of 3 cents exceeded the pre-announced guidance (a loss of 10 cents to breakeven) due to better-than-expected revenues and a strong cost and operating expense management.
In terms of new offerings, as of first-quarter 2024, the customer base for Specialty Pharmacy Services exceeded 400 hospitals and clinics, with an additional seven pharmacies set to open in the second quarter. Omnicell also offers 340B solutions, which are related to the federal 340B Drug Pricing Program, requiring pharmaceutical manufacturers participating in Medicaid to sell covered outpatient drugs at discounted prices to specified healthcare organizations (called 340B covered entities). The company believes that combining its 340B TPA (third-party administrator) services with the Specialty Pharmacy Services program management offering is creating growth opportunities for its customers.
Omnicell, Inc. Price
Omnicell, Inc. price | Omnicell, Inc. Quote
In EnlivenHealth, Omnicell is gaining momentum with cross-selling and upselling communication solutions to existing customers. The brand had a strong first-quarter 2024, with a large buying cooperative choosing its analytics solution to enhance patient care and operational efficiency. Further, central pharmacy dispensing services continued to gain market traction, with several health systems choosing to automate their central pharmacy inventory and dispensing operations.
On the flip side, the broader U.S. economy and the global economy are facing elevated inflationary pressures, continued supply chain disruptions, labor shortages and geopolitical instability. Political unrest and hostilities, such as the ongoing conflicts between Russia and Ukraine or between Israel and Hamas, have brought major complexities to Omnicell’s international operations. Economic downturns mainly in the form of reduced government spending, rising inflation, and higher interest rates have historically lowered demand for Omnicell’s goods and services. All these factors lead to higher costs for the company’s raw materials and other components, which it may not be able to offset from customers through higher prices.
Omnicell’s gross profit dropped 25.9% in the first quarter of 2024. Simultaneously, the company is navigating the ongoing healthcare system capital budget and labor constraints, which have continued to impact its Point-of-Care product line. The challenging environment for some of the health system customers has resulted in a year-over-year decrease in the company’s revenues. While there are positive signs of stabilization and increased spending on capital projects in 2024, challenges such as high labor and operating costs are likely to persist across the industry.
Further, Omnicell faces intense competition in the medication management and supply chain solutions market. Even though the company continues to gain market share from other traditional providers of medication management and supply chain solutions, the company has to compete with larger players such as Becton Dickinson, ARxIUM, Cerner Corporation, Talyst, Inc., Emerson Electronic Co. and WaveMark Inc. Major direct competitors in the medication packaging solutions market like Drug Package, Inc., AutoMed Technologies, Inc. (a subsidiary of ARxIUM), ManchacTechnologies, LLC (through its Dosis product line) and RX Systems, Inc. still pose threats as they spearhead several expansion programs. This increased competition could result in pricing pressure and a reduced margin, which would have an adverse impact on the company’s performance.
Key Picks
Some better-ranked stocks in the broader medical space are Hims & Hers Health HIMS, Medpace MEDP and ResMed RMD. While Hims & Hers Health and Medpace sport a Zacks Rank #1 (Strong Buy) each, ResMed carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks Rank #1 stocks here.
Hims & Hers Heath stock has surged 117% in the past year. Estimates for the company’s earnings have risen from 11 cents to 18 cents for 2024 and from 25 cents to 33 cents for 2025 in the past 30 days.
HIMS’ earnings beat estimates in three of the trailing four quarters and missed in one, delivering an average surprise of 79.2%. In the last reported quarter, it posted an earnings surprise of a staggering 150%.
Estimates for Medpace’s 2024 earnings per share have moved up to $11.29 from $11.23 in the past 30 days. Shares of the company have surged 78.4% in the past year compared with the industry’s 3% growth.
MEDP’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 12.8%. In the last reported quarter, it delivered an earnings surprise of 30.6%.
Estimates for ResMed’s fiscal 2024 earnings per share have moved to $7.64 from $7.59 in the past 30 days. Shares of the company have declined 7.1% in the past year against the industry’s rise of 1.9%.
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