On Dec 30, 2015, we issued an updated research report on Omnicell, Inc. OMCL – a healthcare solutions provider that develops and markets end-to-end automation solutions for the medication management.
Despite Omnicell’s disappointing third-quarter 2015 results that missed the Zack Consensus Estimate on both lines, we are positive on the company’s strategic acquisitions that are expected to add value.The earlier acquired MACH4 and Avantec contributed approximately $6.5 million to revenues in the reported quarter. We are also positive on the company’s impending buyout of Aesynt.
Notably, Omnicell is progressing well with its three-legged strategy that covers market expansion through delivery of differentiated, innovative solutions; expansion into new markets, primarily outside the U.S.; and expansion through strategic partnerships and acquisition of new technologies.
Omnicell aims to derive a significant portion of its revenues from international operations in the longer term. To this end, the company seeks to expand its international footprint by way of various meaningful strategies. Omnicell has already established its presence in Sweden, Germany, U.K., Singapore and China where strong pipeline development is taking place. In addition, the company has witnessed strong business trends across Europe, in terms of healthy acceptance of its medication adherence products therein.
With the Avantec acquisition, Omnicell can now interact directly with customers in the U.K. on all its product lines including medication adherence, robotic dispensing systems, supply chain systems and automated dispensing cabinets. Taking into account the untapped potential, Omnicell plans to expand its presence in the emerging markets via existing channels to leverage growth.
We are however concerned about the lower-than-expected installations and booking related issues in the Automation and Analytics segment, which are expected to continue in the fourth quarter as well, as reflected by the company’s reduced 2015 revenue guidance.
The stock currently has a Zacks Rank #1 (Strong Buy).
Key Picks from the Sector
Medical stocks such as Allscripts Healthcare Solutions, Inc. MDRX, athenahealth, Inc. ATHN and Quality Systems Inc. QSII are also worth a look. All the three stocks carry a Zacks Rank #2 (Buy).
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