We maintain our long-term Neutral recommendation on
) following mixed quarterly results for the first quarter of
Why the Reiteration?
On May 2, Omnicell's first-quarter net operating earnings of 14
cents per share missed the Zacks Consensus Estimate by a nickel.
Results nevertheless improved 7.7% year over year.
Revenues in the quarter jumped 35.8% year over year to $87.1
million. Despite the considerable improvement, top-line
marginally missed the Zacks Consensus Estimate of $88 million.
Margin pressure due to escalating costs was another headwind for
We also note that constrained hospital spending might hamper
Omnicell's market penetration in the U.S. Tough competitive
landscape also remains an overhang.
However, Omnciell serves a niche industry and stands to gain from
its three-pronged strategy of domestic expansion, selective
acquisitions and targeted international expansion. The company's
foray into the highly profitable and underpenetrated non-acute
care market with the MTS acquisition is yielding positive
The recent contract wins are also encouraging. Given the
substantial demand in the overseas market and the low penetration
rate, international contract wins are likely to accelerate growth
We believe that geographic expansion into lucrative markets such
as Middle East and China should accelerate growth. Also worth
mentioning in this context is Omnicell's strong business trend in
U.K. in the reported quarter.
In light of these facts, it seems like Omnicell is likely to
trend higher as it has been taking a number of strategic steps to
align its assets while expanding its footprint worldwide.
Estimates for the ongoing year are also on the rise. As a result,
the Zacks Consensus Estimate for 2013 shot up 29.2% over the last
30 days to 84 cents. This reflects estimated growth of 40% year
The stock carries a Zacks Rank #2 (Buy). Other stocks in the
industry carrying a Zacks Rank #2 are
Merge Healthcare Incorporated
The Cooper Companies Inc
CONMED CORP (CNMD): Free Stock Analysis
COOPER COS (COO): Free Stock Analysis Report
MERGE HEALTHCAR (MRGE): Free Stock Analysis
OMNICELL INC (OMCL): Free Stock Analysis
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