Omnicell, Inc. OMCL has witnessed strong momentum in the past year. Shares of the company have risen 41.6% against a 11.3% decline of the industry during the same time frame. The S&P 500 composite has increased 16.2%.
With healthy fundamentals and strong growth opportunities, this Zacks Rank #3 (Hold) company appears to be a solid wealth creator for its investors at the moment.
Omnicell develops and markets end-to-end automation solutions for the medication-use process. Its products enable care providers to improve patient safety and increase efficiency by lowering costs. The company categorizes its offerings under Product, and Service and other.
Product revenues come from software-enabled connected devices, software licenses, packaging equipment and other supplies. They also include consumables such as medication adherence packaging, labelling and other one-time-use packaging. Service and other revenues include post-installation technical support and other related services and SaaS and Expert Services.
Factors Favoring OMCL’s Share Price Growth
Omnicell's share price is trending upward, prompted by the introduction of the XT Amplify program. Per the latest update, XT Amplify is gaining significant market acceptance. Additionally, a robust pipeline for SaaS and Expert Services portfolio is driving the share price. This optimism, led by a solid fourth-quarter performance and increasing revenues from Service and other category, is expected to contribute further.
Investors showed optimism about Omnicell’s recent launches during 2024, which included, OmniSphere, a next-generation, cloud native, software workflow engine and data platform that is intended to seamlessly integrate enterprise-wide robotics and smart devices to support more secure, data-driven, medication management across the continuum of care.
Additionally, the company introduced Central Med Automation Service, a subscription-based solution designed to help health systems establish and continuously optimize centralized medication management for consolidated pharmacy services centers (CPSCs) and similar operations. These recent launches bolstered OMCL stock.
Omnicell’s 2025 financial roadmap looks impressive. The company is aiming to reach $1.9-$2 billion in revenues by 2025. Additional targets include a non-GAAP gross margin of 52-53% and a non-GAAP EBITDA margin of approximately 23%. As an update on the progress, OMCL delivered a non-GAAP EBITDA of $46 million in the fourth quarter of 2024, well above its guidance of $14-$20 million. Additionally, non-GAAP earnings per share of 60 cents exceeded the pre-announced guidance. This success was led by strong cost and operating expense management. Accordingly, these results have positively impacted the company’s shares, contributing to their price increase.
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Investors seem optimistic regarding Omnicell’s strong liquidity and capital structure. It exited 2024 with cash and cash equivalents of $369.2 million and zero short-term debt on its balance sheet. This is indicative of a sound solvency position. Long-term debt remained unchanged at $341 million sequentially.
Factors That May Offset OMCL’s Gains
In the fourth quarter 2024, product revenues declined 25.1% year over year. This was due to headwinds arising from continued supply-chain disruptions, labor shortages, geopolitical instability and inflationary pressures in broader U.S. and global economies. All of these factors are leading to higher costs for the company’s raw materials, which it may not be able to offset from customers through higher prices.
Simultaneously, Omnicell faces intense competition in the medication management and supply-chain solutions market. Major players pose threats as they spearhead several expansion programs. This increased competition could result in pricing pressure and a reduced margin, negatively impacting the company’s performance.
A Look at OMCL’s Estimates
The Zacks Consensus Estimate for 2025 EPS has moved south 3.3% to $1.74 in the past 30 days.
Omnicell has an earnings yield of 4.61% against the industry’s 5.86% decline.
Stocks to Consider
Some better-ranked stocks in the broader medical space are Masimo MASI, Boston Scientific BSX and Cardinal Health CAH.
Masimo has an earnings yield of 2.5%, well ahead of the industry’s -3.6%. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 14.4%. Its shares have surged 45.3% against the industry’s 2.2% decline in the past year.
MASI sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Boston Scientific, carrying a Zacks Rank #2 (Buy) at present, has an earnings yield of 2.7% compared with the industry’s 1.4%. Shares of the company have rallied 53.6% compared with the industry’s 13.3% growth. BSX’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 8.3%.
Cardinal Health, carrying a Zacks Rank #2 at present, has an estimated long-term earnings growth rate of 10.7% compared with the industry’s 9.4%. Shares of the company have rallied 12.1% against the industry’s 2.3% decline. CAH’s earnings surpassed estimates in each of the trailing four quarters, the average surprise being 9.6%.
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