California-based healthcare solutions provider Omnicell, Inc. OMCL has provided an update on its financial guidance for first quarter and full-year 2015. The company’s update comes on the heels of multiple allegations by an employee, which include the existence of a ‘side letter’ arrangement with an Omnicell customer, and takes into consideration the impending acquisition of MACH4 Pharma Systems.
Meanwhile, the company has declared a delay in the filing of its Annual Report on Form 10-K for the year ended Dec 31, 2014 following the allegation.
Evidently, on Feb 27, the said employee brought to the notice of management that the ‘side letter’ arrangement mentions certain discounts and Omnicell products that were to be provided at no cost. However, these were not reflected in the final invoices paid by the customer. Following the notice, Omnicell initiated an internal investigation on the matter.
Omnicell holds that the outcome of this investigation will not have any bearing on its competitive position in the market or on customer interest in its products. Accordingly, the company reiterated the outlook provided earlier. The company still expects revenues in the range of $480−$490 million, reflecting annualized growth of 9% to 11%. The current Zacks Consensus Estimate of $486 million exceeds the midpoint of the guided range.
Full-year adjusted earnings forecast is still pegged in the band of $1.35–$1.40 (estimated growth of 7–12%). The current Zacks Consensus Estimate for EPS of 99 cents falls far below the guided range. At the end of 2015, Omnicell expects product bookings of $390–$405 million.
For the first quarter of 2015, the company expects revenues of $110 million−$115 million and adjusted EPS of 23 cents. While the Zacks Consensus Estimate for revenues of $111 million falls within the guided range, the same for EPS stands at 14 cents, below the company’s projection.
However, the company is optimistic about its impending acquisition of Germany-based MACH4 Pharma Systems which was announced on Feb 26, 2015. According to Omnicell, if the acquisition is closed within the projected date of Apr 1, 2015, this will increase the company’s 2015 revenues to the range of $492−$505 million with product bookings in the band of $398−$416 million. On the other hand, post-inclusion of MACH4 Pharma Systems, adjusted earnings are expected to drop to the range of $1.31−$1.36 per share.
Omnicell is currently focusing on the successful application of its three strategies targeted toward growth, viz. compellingly differentiated products, expansion into new markets and targeted acquisition. The company has successfully doubled its revenues and tripled its profits over the past five years. We believe the acquisition of MACH4 Pharma Systems will strengthen the company’s foothold internationally. However, legal matters, if unresolved, may weigh on the stock.
Zacks Rank
Omnicell currently bears a Zacks Rank #4 (Sell). However, some better-ranked stocks in the broader medical sector are Almost Family Inc. AFAM, LHC Group, Inc. LHCG and Chemed Corp. CHE. All the three stocks hold a Zacks Rank #1 (Strong Buy).
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