Omnicell Posts a Strong Quarter - Analyst Blog


Omnicell Inc. ( OMCL ) reported EPS of 12 cents in the fourth quarter of fiscal 2011, beating both the Zacks Consensus Estimate of 8 cents and the year-ago EPS of 2 cents.Reported earnings skyrocketed 500% on a year-over-year basis primarily due to the reduction in effective tax rate from 59.6% in the year-ago quarter to 32.2% in the reported quarter. The closure of Omnicell's Bangalore, India office resulted in a charge for repatriation taxes and a valuation allowance against related deferred tax assets in the fourth quarters of 2010. In fiscal 2011, EPS came in at 30 cents versus 15 cents a year ago. Reported EPS also beat the Zacks Consensus Estimate by a penny.

Revenues in the reported quarter increased 9.9% year over year to $62.9 million and were almost in line with the Zacks Consensus Estimate. For the full year, revenues stood at $245.5 million, up 10.4% year over year. Product revenue, contributing 75.2% of revenues, climbed 8.6% to $47.3 million in the quarter while the same from Services and Others (contributing the rest), witnessed an upside of 14.0%.

Cost of Product sales were up 4.9% to $19.6 million in the quarter. However, cost of Services and Others revenues witnessed a year-over-year rise of 3.1%. Notwithstanding this, gross margin expanded 225 basis points (bps) to 57.01% during the quarter.

The company's research and development (R&D) expenses jumped 9.3% to $5.9 million while selling, general and administrative (SG&A) expenses dropped 2.6% to $23.8 million. Operating margin during the quarter expanded a massive 720 bps to 9.8%.

At the end of the reported quarter, the company had cash and cash equivalents of $191.8 million compared with $175.6 million at the end of December 2010.

Omnicell stands to benefit from favorable demographic trends, regulatory environments and a 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.

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 potentials. The company expects the adoption curve to show an ascending pattern going forward, as it is on track to develop products incorporating new technologies, to capture more market share from its competitors and continue winning more deals.

Notwithstanding the concerns arising from several macro-economic uncertainties as well as intense competition from major players such as CareFusion Corporation ( CFN ) and McKesson Automation ( MCK ), we are optimistic about Omnicell's growth prospects globally.

Currently, Omnicell retains a short-term Zacks #2 Rank (Buy). However, over the long term, we remain 'Neutral' on the stock.

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, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: CFN , MCK , OMCL

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