We have reiterated our Neutral recommendation on
) with a target price of $15.00.
Omnicell reported EPS of 4 cents in the second quarter of fiscal
2012, lower than the year-ago quarter EPS of 8 cents. The Zacks
Consensus EPS for the second quarter of 2012 was 6 cents.
However, excluding the impact of certain one-time items
associated with the MTS acquisition, the adjusted EPS for the
quarter came in at 13 cents. Revenues in the reported quarter
increased 23.6% year over year to $75.4 million, exceeding the
Zacks Consensus Estimate of $73 million.
Omnicell's recent acquisition of MTS Medication helped the
company to step into the non-acute care market, where MTS is a
major player. The acquisition brings on board MTS Medication's
automated medication adherence packaging equipment and consumables
for the non-acute care segment, helping Omnicell, to emerge as a
leading provider of medication management solutions for both the
acute and non-acute care settings.
Therefore, the acquisition will have a significant impact on
Omnicell's business, as reflected in its revised guidance for 2012.
Omnicell raised its 2012 adjusted EPS guidance to the range of
75−81 cents from its previous full-year adjusted EPS guidance of
67−72 cents. The acquisition also drove management's revenue
expectation to the range of $307−$315 million from the earlier
range of $263−$267 million.
The company primarily operates in a niche automated medication
distribution industry and stands to benefit from favorable
demographic trends, regulatory environments, and lack of nursing
staffs. As the information technology market is growing by leaps
and bounds with increasing investment by healthcare companies and
gradual modernization of the healthcare system, the demand for
automated healthcare management systems has also been on the
In order to capitalize on the opportunity in this segment,
Omnicell introduced its next-generation G4 product platform last
year. This G4 platform is cost effective and complies with
increasingly stringent regulatory requirements.
Furthermore, the company is on a deal winning spree, especially
after the launch of G4. We consider Omnicell's recent announcement
of G4 expansion at New Jersey-based Hackensack University Medical
Center and the University of South Alabama Health System.
Additionally, Omnicell aims to expand into the international
market given the fact that the international market is less than 1%
penetrated with very few hospitals adopting medication control
However, margin headwinds and limited capital spending remain
concerns. Hospital purchases remain a bigger challenge for the
small community hospitals than the big ones due to financial
Moreover, the reimbursement mix has also affected endowments
income, further affecting hospital spending capabilities. While the
company has won some new deals in larger hospitals, the market
continues to be affected by the economy and adverse credit
Omnicell also faces intense competition in the medication
management and supply chain solutions market from major players
). The company currently retains a short-term Zacks #3 Rank
CAREFUSION CORP (CFN): Free Stock Analysis
MCKESSON CORP (MCK): Free Stock Analysis Report
OMNICELL INC (OMCL): Free Stock Analysis Report
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