On Mar 19, 2013, we reiterated our Neutral recommendation on
) following its fourth-quarter results. The stock also carries a
Zacks Rank #3 (Hold).
Why the Reiteration?
On Jan 31, 2013, Omnicell's fourth-quarter EPS shot up 50% on a
year-over-year basis to 18 cents, a beat of 12.5% over the Zacks
Consensus Estimate. Revenues jumped 43.3% year over year to $90.2
million, a milestone for the company, surpassing the Zacks
Consensus Estimate of $87 million.
Omnicell continues to benefit from its entry into the highly
profitable and underpenetrated non-acute care market with the
acquisition of MTS Medication. The company's access to automated
medication adherence packaging equipment and consumables across
the non-acute range of patient care should catalyze growth over
the long haul. In addition, there is a substantial demand for
adherence packaging equipment in the overseas market.
Moreover, the company is also gaining from the shortage of
nursing facilities in the U.S. that is leading to higher uptake
of the automation solutions by an increasing number of
institutions. Omnicell's recent contract wins, new as well as
competitive, reflect this upside.
On the international front, Omnicell plans to expand its
footprint in the emerging markets via existing channels to
accelerate growth. It strengthened its foothold in the lucrative
Middle East market with the Sidra Medical and Research Center
contract. We strongly believe that these contract wins will
support the company's positive sales momentum.
On the other hand, Omnicell faces a tough competitive landscape
from larger players. This increased competition could result in
pricing pressure and a reduced margin, which would have an
adverse impact on the company's performance.
Moreover, hospital spending trends remain unyielding. This
presents a difficulty to penetrate the market for smaller
hospitals. While the company has won some new deals in larger
hospitals, the rest of the market is still susceptible to the
economy and credit conditions.
While looming concerns keep us on the sidelines for Omnicell,
other medical stocks such as
) are likely to do well. These stocks carry a Zacks Rank #2 (Buy)
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