Omnicell Inc. (OMCL) reported an EPS of 2 cents during the first quarter of fiscal 2011, missing the year-ago quarter’s 3 cents. However, the adjusted EPS (excluding tax settlement expenses for litigation claims) came in at 3 cents, in-line with both the Zacks Consensus Estimate and the prior-year quarter’s result.
Revenue in the quarter increased 5.5% year over year to $57.2 million, marginally missing the Zacks Consensus Estimate of $58.0 million. Product revenue, contributing 74.5% of Omnicell’s total revenue, budged up 0.7% to $42.6 million during the quarter. However, revenues from Services and Others, contributing for the rest witnessed a robust 22.9% increase.
Gross margin expanded 440 basic points to 55.3% in the first quarter 2011, as cost of Product sales declined 7.4% to $17.8 million for the quarter. However, cost of Services and Others revenues witnessed a year-over-year increase of 4.9%.
The company’s Selling, general and administrative (SG&A) expenses and Research and development (R&D) expenses increased 19.8% to $25.8 million and 6.0% to $4.8 million respectively. This led to a fall of 98 basis points in operating margin to 1.8% during the quarter.
At the end of the reported quarter, cash and cash equivalents were $173.6 million, compared to $175.6 million at the end of December 2010.
Omnicell has undertaken several initiatives in the past few quarters to drive revenues which include the Savvy mobile medication management solution, partnership with Cardinal Health (CAH) and also the acquisition of Pandora Data Systems. In addition, earlier in this month, the company announced the launch of fourth-generation, single unified database platform for medications maintained in automated dispensing cabinets.
Omnicell operates in the niche automated medication distribution industry and stands to benefit from favorable demographic trends, regulatory environments, and a lack of nursing staff. The company’s products, primarily purchased by hospitals and nursing homes, are presently grappling with the weak credit markets and high unemployment. However, we believe that a slowly recovering economy will help the company to tap the under-penetrated healthcare IT market.
Presently we remain Neutral on Omnicell.
CARDINAL HEALTH (CAH): Free Stock Analysis Report
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