Omnicell Inc. (OMCL) reported EPS of 8 cents during the second quarter of fiscal 2011, beating both the Zacks Consensus Estimate and the year-ago quarter EPS of 6 cents.
Revenue in the reported quarter increased 6.6% year over year to $61.0 million, surpassing the Zacks Consensus Estimate of $60.0 million. Product revenue, contributing 75.8% of Omnicell’s top line, increased 8.5% to $46.2 million in the quarter while revenues from Services and Others (contributing the rest), witnessed a marginal upside of 1.4%.
Cost of Product sales were up 10.6% to $46.2 million for the quarter. However, cost of Services and Others revenues witnessed a year-over-year decline of 2.7%. Gross margin during the quarter remained stagnant at 55.4%.
The company’s research and development (R&D) expenses jumped 9.1% to $5.3 million while selling, general and administrative (SG&A) expenses plunged 5.8% to $24.3 million. This led to a 510 basis points expansion in operating margin to 6.9% during the quarter.
At the end of the reported quarter, cash and cash equivalents were $181.3 million compared with $175.6 million at the end of December 2010.
Omnicell operates in a niche automated medication distribution industry and stands to benefit from favorable demographic trends and regulatory environments as well as lack of nursing staff. The company has undertaken several initiatives in the past few quarters to drive revenues including the launch of Savvy mobile medication management solution, partnership with Cardinal Health (CAH) and also the acquisition of Pandora Data Systems.
Although Omnicell expects to boost its sales in the upcoming quarters, constrained hospital spending remains a prime concern. Moreover, the company faces intense competition in the medication management and supply chain solutions market from major players such as CareFusion Corporation (CFN) and McKesson Automation (MCK).
Presently, we remain Neutral on Omnicell.
CARDINAL HEALTH (CAH): Free Stock Analysis Report
CAREFUSION CORP (CFN): Free Stock Analysis Report
MCKESSON CORP (MCK): Free Stock Analysis Report
OMNICELL INC (OMCL): Free Stock Analysis Report
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