On Nov 7, 2014, we issued an updated research report on Omnicell Inc. ( OMCL ). The company recently reported a mixed third-quarter 2014 with the top line surpassing the Zacks Consensus Estimate, but the bottom line missing the benchmark.
The three-pronged strategy of domestic expansion, selective acquisitions and targeted international expansion has begun yielding positive results. However, a much higher-than-expected tax rate and an unforeseen foreign currency hit were the major factors that offset growth in operating income in the quarter, in turn, hurting earnings growth during the period.
Adjusted earnings per share came in at 22 cents (considering stock-based compensation as a regular expense), down 8.3% from the year-ago equivalent of 24 cents. Adjusted earnings also missed the Zacks Consensus Estimate of 24 cents by the same margin. On the other hand, revenues increased 19.7% year over year to $112.5 million, exceeding the Zacks Consensus Estimate of $105 million.
Revenue growth was primarily led by the momentum that management observed in the creation of new customers. Notably, 39% of Omnicell's orders for Automation and Analytics products came from new and competitive conversion customers, on a year-to-date basis, which reflects the company's ever expanding customer base.
During the reported quarter, the company completed the acquisition of UK-based medication adherence packaging leader - Surgichem, thereby enhancing its presence in the medication management market in the U.K. According to the company, Surgichem's medication adherence solutions with committee pharmacies will perfectly complement Omnicell's existing business in the U.K. that has predominantly served large obtained pharmacy.
Although, we are concerned with the escalating product costs, a balanced segmental improvement was seen on the back of strong demand to upgrade to the company's G4 platform. Moreover, we view the three-pronged strategy quite in sync with Omnicell's growth performance.
The stock currently carries a Zacks Rank #2 (Buy).
Key Picks from the Sector
Some other well-ranked stocks in the broader medical sector that warrant a look include Abaxis, Inc. ( ABAX ), Boston Scientific Corp. ( BSX ) and ICU Medical, Inc. ( ICUI ). All the three stocks carry a Zacks Rank #2 (Buy).
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