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Omnicell (OMCL) Earnings Beat, Revenues Miss Estimates in Q3

Omnicell, Inc. OMCL reported earnings per share of 42 cents in third-quarter 2017, beating the Zacks Consensus Estimate by a penny. Earnings improved from the year-ago figure of 40 cents as welll.

Revenues in Detail

Revenues during the third quarter increased 5.7% year over year to $186.8 million, missing the Zacks Consensus Estimate of $192 million. The year-over-year upside was driven by the product sensation and related ramp-up of the XT Series launch. Revenues also lagged the company’s guided range of $188 million to $194 million owing to the impact of the Harvey and Irma hurricanes.

On a segmental basis, Omnicell’s Automation and Analytics revenues inched up 1.5% year over year in the third quarter to $154.7 million.

However, revenues at the Medication Adherence segment rose 32.2% year over year to $32.1 million.

 

Omnicell, Inc. Price, Consensus and EPS Surprise

 

Omnicell, Inc. Price, Consensus and EPS Surprise | Omnicell, Inc. Quote

 

Operational Update

Omnicell's gross profit during the reported quarter increased 4.1% to $84.9 million. Gross margin contracted 70 basis points (bps) to 45.4%. According to the company, adjusted gross margin in the third quarter was 47.6%, reflecting a contraction of 310 bps year over year.

SG&A expenses in the third quarter declined 4.2% year over year to $58.7 million. Research and development expenses rose 7.5% year over year to $16.4 million. Operating expenses were $75.1 million in the third quarter, down 1.9% year over year.

According to the company, adjusted operating expenses in the quarter totaled $67.2 million, down 1.9% from the year-ago quarter.

Financial Update

Omnicell exited third-quarter 2017 with cash and cash equivalents of $7.5 million, compared with $26.9 million at the end of second-quarter 2017.

2017 Guidance

For full-year 2017, Omnicell expects product bookings in the range of $570-$590 million (unchanged from the earlier forecast). The company has slashed the high end of the earlier guidance for adjusted revenues from the band of $720-$740 million to $720-$726 million. Moreover, the company now expects adjusted earnings in the band of $1.27 to $1.33 per shareas compared with $1.22 to $1.34 projected earlier. The Zacks Consensus Estimate for full-year earnings per share is pegged at $1.29. The Zacks Consensus Estimate for full-year revenues stands at $730.3 million.

The company also issued its fourth-quarter 2017 guidance. Management expects adjusted revenues in the band of $201-$207 million. Omnicell projects fourth-quarter 2017 adjusted earnings between 49 cents and 55 cents. The Zacks Consensus Estimate for fourth-quarter revenues is pegged at $207.1 million and earnings per share at 53 cents.

Our Take

Omnicell’s third-quarter 2017 performance was impressive with year-over-year increase in both earnings and revenues. Further, both of the company’s segments witnessed year-over-year growth. We are encouraged to note that the company is working on product innovation through R&D. Also, Omnicell is expected to gain from its recent launches and strategic partnerships.During the third quarter, the company launched XT Series Automated Supply Dispensing system, which is another encouraging development. However, weak margin is a matter of concern.

Zacks Rank & Key Picks

Omnicellhas a Zacks Rank #3 (Hold).

A few better-ranked stocks in the broader medical sector are PetMed Express, Inc. PETS, Illumina, Inc. ILMN and Intuitive Surgical, Inc. ISRG. Notably, PetMed sports a Zacks Rank #1 (Strong Buy), while Illumina and Intuitive Surgical carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

PetMed reported EPS of 43 cents for the second quarter of fiscal 2018, up 79.2% from the year-ago quarter’s 24 cents. Also, gross margin expanded 548 bps year over year to 35.2% in the reported quarter.

Illumina reported adjusted earnings per share of $1.11 in the third quarter of 2017, up 14.4% year over year. Also, Illumina's revenues grew 17.6% year over year to $714 million.

Intuitive Surgical posted adjusted earnings of $2.77 per share in the third quarter of 2017, up 34.5% on a year-over-year basis. Also, revenues increased 18% year over year to $806.1 million.

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