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Here's Why You Should Hold Onto Omnicell (OMCL) Stock for Now

Zacks Equity Research

Omnicell, Inc. OMCL is progressing well with expansion through strategic partnerships and acquisition of new technologies.

In the past year, the company’s shares have outperformed the industry. The stock has rallied 8.3% compared with the industry’s 8.8% fall.

This leading developer and marketer of end-to-end automation solutions for the medication-use process has a market cap of $2.88 billion. The company has an expected earnings growth rate of 15% for the next three to five years.

Riding on solid prospects, this Zacks Rank #3 (Hold) stock is worth holding on to for now.

Product Innovation Driving Growth: Of late, the company has been witnessing strong adoption of its G4 platform. It is upbeat about the launch of the XR2 Central Pharmacy Robot and the IVX Workflow.

Focus on Geographic Expansion: The company is focusing on expanding into new markets, which is driving significant growth in the Non-Acute Care segment. While the company continues to focus on the Middle East and South Africa, it has lately been witnessing greater adoption of technologies in Australia, the United Kingdom, parts of Asia, Germany and France.


Acquisitions & Partnerships Add Value: Some of the recent partnerships inked by the company in the second quarter of 2019 include that of Spartanburg Regional Healthcare System. The company has also forged a partnership with MUSC Health, which will be implementing Omnicell's Robotic IV Insourcing Solution to bring sterile compounding in-house as part of the health system central pharmacy operation.


The following are some of the factors marring the company’s growth:

Escalating Costs and Expenses:  The company continues to battle escalating costs. Also, it expects costs to escalate in the upcoming quarters owing to the integration of new acquisitions and expenses related to the recently-launched XT series and IV workflow.

Competitive Landscape: Omnicell faces intense competition in the medication management and supply chain solutions market from major players such as Becton Dickinson/CareFusion Corporation, ARxIUM, Cerner Corporation etc. The intensifying competition could result in pricing pressure and reduced margins for the company.

Which Way Are Estimates Heading?

For the third quarter of 2019, the Zacks Consensus Estimate for earnings is pegged at 72 cents, which indicates 14.3% growth over the year-ago quarter’s figure. The same for revenues is pegged at $231.4 million, calling for year-over-year growth of 13.3%.

For 2019, the Zacks Consensus Estimate for earnings is pegged at $2.79, suggesting 33.5% year-over-year growth. The same for revenues is pegged at $894.3 million, suggesting 13.6% rise from the prior-year number.

Key Picks

A few better-ranked stocks in the broader medical space are Medtronic MDT, Baxter BAX and NuVasive Corporation NUVA. Each of these companies carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy)  stocks here.

Medtronic’s long-term earnings growth rate is expected at 7.13%.

Baxter’s long-term earnings growth rate is projected at 12.8%.

NuVasive’s long-term earnings growth rate is expected to be 12.75%.

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