Omnicell, Inc. OMCL reported second-quarter 2015 adjusted earnings per share of 18 cents (including stock-based compensation), down from the year-ago number by a penny. Adjusted earnings also lagged the Zacks Consensus Estimate by 14.3%.
Revenues in Detail
Revenues increased 7.4% year over year to $112.8 million in the quarter, but missed the Zacks Consensus Estimate of $121 million.
Omnicell witnessed that 47% of its orders in the quarter were owing to new and competitive conversion customers making first time installations – much higher than its 10-year historical trend ranging between 33% and 40%.
However, Omnicell’s customers exhibited an installation completion rate slower than that originally estimated by the company. This resulted in lower-than-expected revenue growth.
On a segmental basis, during the quarter, Omnicell’s Automation and Analytics segment’s revenue increased 4.7% to $88.7 million. The company encouragingly noted that, 31% of its orders in this segment were from customers making first time installations of Omnicell systems.
Revenues from the Medication Adherence segment improved 21.9% to $24.1 million.
Operational Update
Omnicell's adjusted gross profit during the reported quarter improved 2.8% to $58 million. However, adjusted gross margin contracted 230 basis points (bps) to 51.4%.
Adjusted operating expenses in the quarter increased 10.3% to $47.2 million. Consequently, adjusted operating profit dropped 8.8% to $23.9 million, with adjusted operating margin contracting 380 bps to 21.2% in the reported quarter.`
Acquisitions
During the second quarter, Omnicell completed the acquisitions of MACH4 Pharma Systems and Avantec Healthcare, both of which are expected to boost its business in Europe. The robotic dispensing systems of MACH4 will allow Omnicell to expand its customer base in the hospital central pharmacy and retail pharmacy space, while through Avantec (a reseller) acquisition – Omnicell can now directly interact with its customers in the U.K.
Financial Update
Omnicell exited the quarter with cash and cash equivalents of $88 million, compared with $125.9 million at the end of 2014.
Outlook
Omnicell reaffirmed its financial guidance for full year 2015. The company continues to expect full year revenues in the range of $495−$510 million, representing annualized growth of 12% to 16%. Omnicell also continues to forecast 2015 adjusted EPS in the band of $1.31–$1.36.
Our Take
We believe, buoyed by its strong business performance in the reported quarter, Omnicell has reaffirmed its 2015. Moreover, strategic acquisitions are expected to add value to the company’s growth profile. We expect the company’s recent acquisitions of MACH4 and Avantec will increase its revenues from Europe in the coming quarters of 2015.
However ,the lower-than-expected installation by customers, if continue to persist in the future quarters, may significantly hamper Omnicell’s revenue growth, going ahead. Nevertheless, the company’s solid order growth during the quarter buoys optimism.
Zacks Rank
Omnicell currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector are Merge Healthcare Incorporated MRGE, Allscripts Healthcare Solutions, Inc. MDRX and CollabRx, Inc. CLRX. While Merge Healthcare sports a Zacks Rank #1 (Strong Buy), Allscripts and CollabRx hold a Zacks Rank #2 (Buy).
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