Omnicell Beats, Eyes MTS Medication - Analyst Blog

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Omnicell Inc. ( OMCL ) reported EPS of 7 cents in the first quarter of fiscal 2012, ahead of the year-ago quarter EPS of 2 cents and surpassing the Zacks Consensus Estimate by a penny.

However, including $1.0 million in pre-tax settlement expense related to litigation claims in the year-ago period, adjusted EPS came in at 4 cents for the first quarter of 2011. The reported earnings increased 75% on a year-over-year basis primarily on the back of revenues growth and improved margins during the quarter.

Revenues in the reported quarter increased 12.2% year over year to $64.1 million, exceeding the Zacks Consensus Estimate of $63 million. Product revenue, contributing 75.6% of revenues, climbed 13.9% to $48.5 million in the quarter while the same from Services and Others (contributing the rest) witnessed an upside of 7.1%.

MTS Medication Technologies Acquisition

In a separate development, Omnicell announced that it has entered into a deal to acquire MTS Medication Technologies, a global medication adherence packaging systems provider for $156 million in cash, subject to certain adjustments.

The company expects the acquisition to close in late second quarter or third quarter of 2012. Omnicell exited the first quarter with cash, cash equivalents and short-term investments of $209.5 million compared with $199.8 million at the end of December 2011.

The transaction is expected to be accretive in 2012 and boost the bottom line in fiscal 2013 by roughly 15 -17 cents per share. 

Omnicell remains optimistic regarding the acquisition as it will enable it to access MTS' automated medication adherence packaging equipment and consumables. This will facilitate the company to offer a complete automated medication management system across the acute and non-acute range of patient care.

Margins

Cost of Product sales were up 13.8% to $20.3 million in the quarter. However, cost of services and Others revenues witnessed a year-over-year rise of 5.5% to $7.6 million. Notwithstanding this, gross margin expanded 30 basis points (bps) to 55.7% during the quarter.

The company's research and development (R&D) expenses jumped 34.2% to $6.5 million while selling, general and administrative (SG&A) expenses dropped 1% to $25.6 million. Operating margin during the quarter expanded a significant 390 bps to 5.7%.

Our take

We are encouraged with Omnicell's strong top and bottom-line performance in the reported quarter. Moreover, the pending MTS acquisition is concurrent with the company's strategy of strengthening its foothold in the automation and business information solutions market.

Additionally, given the fact that very few hospitals have adopted medication control systems in the international market, Omnicell is presently working hard to establish its presence in the global arena, especially in markets with huge potential.

Omnicell stands to benefit from favorable demographic trends, regulatory environment and lack of nursing staff. As the information technology market is growing in leaps and bounds coupled with increasing investment from healthcare industries, Omnicell is confident about its success in the near to medium term, specially aided by its SinglePointe and Anywhere RN products.

However, several macroeconomic uncertainties as well as intense competition from major players such as CareFusion Corporation ( CFN ) and McKesson Automation ( MCK ) remain concerns. Currently, Omnicell retains a short-term Zacks #1 Rank (Strong Buy).


 
CAREFUSION CORP (CFN): Free Stock Analysis Report
 
MCKESSON CORP (MCK): Free Stock Analysis Report
 
OMNICELL INC (OMCL): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: CFN , MCK , OMCL

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