Omnicell Raised to Strong Buy - Analyst Blog

On April 2, 2014, Zacks Investment Research upgraded Onmicell, Inc. OMCL to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Over the past 60 days, Omnicell has been witnessing rising estimate revisions for 2014 with three upward revisions against no downward movement. The positive revisions drove a 6.5% rise in Zacks Consensus Estimate to 99 cents per share over the same time frame. Moreover, Omnicell has an estimated long-term growth of 19.3%, up 210 basis points from the industry average growth of 17.2%. This implies healthy prospects over the long haul.

This global leader in the medical information systems industry reported mixed fourth-quarter and full year 2013 results on Feb 4.  Revenues for 2013 beat the Zacks Consensus Estimate by 1.2%. For full-year 2013, Omnicell reported adjusted earnings per share EPS of 77 cents, up 28.3% from the year-ago level of 60 cents.

Omnicell provided a promising guidance for full-year 2014. Per the guidance, full year 2014 adjusted EPS forecast lies in the band of $1.17–$1.23. The Zacks Consensus Estimate of 99 cents lies far below the company's guidance. Thus, Omnicell's EPS guidance represents an annualized growth rate of 52%–60%. The company's liquidity also improved significantly as it exited 2013 with cash and cash equivalents of $104.5 million, up 67.7% from the 2012-end level.

Moreover, Omnicell was awarded the certification for International Organization for Standardization (ISO) 14001:2004 Environmental Management System (EMS), showcasing the company's commitment toward lowering its environmental impact.  Also, in Feb 2014, Omnicell announced the opening of its office in Beijing, China in a bid to strengthen its global presence.

At the same time, we observe that the MTS acquisition has provided a firm foundation to Omnicell to compete in the non-acute care market. Moreover, the company's multi-med medication adherence solutions continue to do well in Europe with over 500,000 patients receiving prescriptions for it each week. We believe top-line synergy from the MTS acquisition along with several contract wins in the domestic and offshore markets are likely to boost organic growth going ahead.

Other Stocks to Consider

Some other stocks worth considering in the medical information systems industry are athenahealth, Inc. ATHN, Streamline Health Solutions, Inc. STRM, and Computer Programs & Systems Inc. CPSI. All the three stocks carry a Zacks Rank #2 (Buy).