On Feb 1, we issued an updated research report on Omnicell, Inc. OMCL. The company has laid out its strategy of expanding into new markets. This strategy so far has been driving significant growth in the Non-Acute Care segment. However, a tough competitive landscape is a dampener. The stock carries a Zacks Rank #3 (Hold).
This developer and marketer of end-to-end automation solutions for the medication-use process has outperformed its industry over the past year. The stock has gained 46.3% against the industry’s 4.8% decline.
Outside the United States, healthcare providers are becoming increasingly aware of the benefits of automation. Additionally, there is substantial demand for adherence packaging equipment outside the domestic market. Given the fact that the international market is less than 1% penetrated with very few hospitals adopting medication control systems, Omnicell is rapidly expanding into new markets.
While the company continues to focus on the Middle East and South Africa, it sees greater adoption of technologies in other parts of the world, the latest area being Australia. Internationally, the company announced its first IV robotics deal and forayed into the South Korean market with several hospital locations.
We are also upbeat about the company successfully progressing through acquisitions and partnerships. Omnicell’s latest buyout is InPharmics, a Mississippi-based technology and services company which should help Omnicell expand the capabilities of its Performance Center. The company is witnessing solid cross-selling momentum within the total product platform and combined customer base, specifically for the company’s XR2, IV and Performance Center solutions in both the pipeline and the bookings.
Meanwhile, Omnicell faces intense competition in the medication management and supply chain solutions market. Stiff competition could result in pricing pressure and a reduced margin, which will affect the company’s performance in turn.
Also, company continues to battle escalating costs. Omnicell continues to expect higher costs in the upcoming quarters stemming from integration of new acquisitions and expenses related to the recently-launched XT series and IV workflow.
Key Picks
Some better-ranked stocks in the broader medical space are Varian Medical Systems VAR, AngioDynamics ANGO and CONMED Corporation CNMD.
AngioDynamics has a Zacks Rank of 1 (Strong Buy) and an expected revenue growth rate of 4.3% for fiscal 2019. You can see the complete list of today’s Zacks #1 Rank stocks here.
Varian Medical Systems’ long-term earnings growth rate is estimated at 8%. The stock flaunts a Zacks Rank #2 (Buy) at present.
CONMED’s long-term earnings growth rate is projected at 11.5%. The stock currently carries a Zacks Rank #2.
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