Is it Apt to Retain Omnicell Stock in Your Portfolio Now?

Omnicell OMCL is advancing toward the industry-defined vision of Autonomous Pharmacy by leveraging automation and advanced services across its cloud-based platform. OMCL’s progress toward its 2025 financial goals instills optimism. However, adverse macroeconomic challenges and fierce rival pressure could hurt Omnicell’s performance.

Currently carrying a Zacks Rank #3 (Hold), OMCL’s shares have risen 3.2% year to date compared with the industry's 31.5% growth. The S&P 500 composite has increased 11.4% in the said time frame.

The renowned healthcare technology company has a market capitalization of $1.45 billion. Omnicell’s earnings surpassed estimates in each of the trailing four quarters, delivering an average surprise of 80.78%.

Tailwinds for OMCL Stock

Autonomous Pharmacy Model Holds Potential: The industry-defined vision of Autonomous pharmacy is a roadmap to improving operational efficiencies and ultimately targeting zero-error medication management. In this regard, Omnicell’s medication management infrastructure provides a critical foundation for customers to realize the industry vision. The company is significantly investing in R&D efforts to help drive positive medication management outcomes while ensuring an exceptional customer experience through a mature channel in four market categories.

Within the Point of Care product market, Omnicell expects further expansion as customers increase the use of its dispensing systems in more areas within their hospitals and ambulatory care settings. In the first quarter, a non-profit health system in Rhode Island selected Omnicell's point-of-care dispensing solutions, XT Cabinets and anesthesia workstations to improve clinical outcomes and enhance efficiency for healthcare staff. In the previous quarter, an East Coast healthcare organization planned to expand its pharmacy technology strategy with the addition of Omnicell’s XT Cabinet automation to support care initiatives across the enterprise.

Omnicell’s advanced automation solutions include robotics designed to automate work, streamline workflows and reduce human error.  Its central pharmacy automation solutions cater to both medication dispensing and IV compounding. 

2025 Roadmap Looks Impressive: In terms of its financial roadmap, Omnicell aims to attain revenues worth $1.9-$2 billion 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 tech services revenue growth, benefits from long-term sole-source customer partnerships, multi-year co-development plans and increased average deal sizes.

As an update on the progress, in the first quarter, the company delivered non-GAAP earnings per share of 26 cents, which exceeded the pre-announced guidance of 15-25 cents due to robust revenue execution and strong cost and operating expense management.

Headwinds for OMCL Stock

Macroeconomic Challenges: The broader U.S. and global economies are facing elevated inflationary pressures, continued supply-chain disruptions, labor shortages and geopolitical instability. Simultaneously, OMCL is navigating the ongoing healthcare system capital budget and labor constraints, which have continued to affect its Point-of-Care product line. The challenging environment for some of the health system customers also led to a $11.6 million operating loss in the first quarter. 

Competitive Landscape: Omnicell faces intense competition in the medication management and supply-chain solutions market. Even though it continues to gain market share from other providers, major competitors still pose threats as they spearhead several expansion programs. This increased competition could result in pricing pressure and a reduced margin, negatively impacting the company’s performance.

OMCL Estimate Trend

The Zacks Consensus Estimate for 2025 earnings per share has moved south 25% to $1.34 in the past 30 days. 

The Zacks Consensus Estimate for 2025 revenues is pegged at $1.13 billion, suggesting a 1.8% rise from the year-ago reported number.

Key Picks

Some better-ranked stocks in the broader medical space are Phibro Animal Health PAHC, Prestige Consumer Healthcare PBH and Inspire Medical Systems INSP.

Phibro Animal Health has an estimated long-term earnings growth rate of 26.2% compared with the industry’s 15.9%. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 30.6%. Its shares have rallied 26.3% compared with the industry’s 10% growth in the past year.

PAHC flaunts a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Prestige Consumer Healthcare, currently carrying a Zacks Rank #2 (Buy), has an earnings yield of 5.4% compared with the industry’s 0.6%. Shares of the company have rallied 30.3% compared with the industry’s 10% growth. PBH’s earnings surpassed estimates in three of the trailing four quarters and matched on one occasion, the average surprise being 2.8%.

Inspire Medical Systems, carrying a Zacks Rank #2 at present, has an estimated long-term earnings growth rate of 28.9% compared with the industry’s 25.2%. Shares of the company have lost 9.5% against the industry’s 19.6% growth. INSP’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 356.9%.

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This article originally published on Zacks Investment Research (zacks.com).

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