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Omnicell (OMCL) Q4 Earnings Deteriorate Y/Y, Revenues Miss


Omnicell, Inc. OMCL reported a breakeven in fourth-quarter 2016 earnings per share (EPS), a deterioration from the year-ago earnings of 5 cents.

Adjusted EPS however came in at 26 cents (considering stock-based compensation expense as a regular one), down 23.5% year over year.

The Zacks Consensus Estimate for the EPS figure was 7 cents.

For full-year 2016, the company’s reported figure came in at 2 cents per share, substantially below 84 cents recorded in the prior year. Adjusted EPS figure for the full year came in at $1.13, up 4.6% from the prior year.

The Zacks Consensus Estimate for full-year 2016 EPS was 8 cents.

Omnicell, Inc. Price, Consensus and EPS Surprise

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

Revenues in Detail

Revenues during the fourth quarter surged 32% year over year to $172 million, missing the Zacks Consensus Estimate of $181 million.

According to management, the company witnessed strong demand for Aesynt products in the fourth quarter on account of both expansion and upgrades by existing customers, as well as new and competitive conversion customers. Strength has been noted particularly in the combined product portfolio, which offers tailored and scalable solutions for customers.

Full-year 2016 revenues came in at $692.6 million, up 43% year over year but below the Zacks Consensus Estimate of $704.5 million.

On a segmental basis, Omnicell’s Automation and Analytics segment’s revenues increased 35.6% during the fourth quarter to $143.5 million. The year-over-year upside was driven by the acquisition of Aesynt and organic growth.

Meanwhile, revenues at the Medication Adherence segment improved by 15.9% to $28.3 million.

Operational Update

Omnicell's gross profit during the reported quarter was up 14.2% to $74.3 million. Gross margin, however, contracted 672 basis points (bps) to 43.2%.

Adjusted operating expenses in the fourth quarter shot up 40.3% to $74.5 million. Adjusted operating income in the quarter was $1.8 million, down 101.5% from the adjusted operating profit of $11.9 million in the year-ago quarter. Operating margin also contracted a massive 929 bps to 0.1%.

Financial Update

Omnicell exited fiscal 2016 with cash and cash equivalents of $54.4 million, compared with $82.2 million in the prior year. Full-year 2016 operating cash flow was $47.9 million compared with $33.7 million in 2015.

2017 Guidance

For full-year 2017, Omnicell expects product bookings in the range of $570–$590 million. The company expects adjusted revenue (including acquisition accounting impact related to deferred revenues) between $740 million and $760 million. Adjusted earnings are forecasted in the band of $1.32–$1.42 per share.

For the first quarter of 2017, management expects adjusted revenue (including acquisition accounting impact related to deferred revenue) in the band of $150–$155 million. Omnicell expects first-quarter 2017 adjusted earnings between 0-4 cents per share.

Our Take

Omnicell exited fiscal 2016 on a disappointing note. The deterioration in the company’s earnings figure as well as full-year margins add to the concerns.

Meanwhile, we are encouraged by the Aesynt acquisition that has driven Omnicell’s share in the medication automation and analytics market. The fourth quarter was a robust one for Aesynt products. Nevertheless, post the Aesynt takeover, management’s confidence in delivering significant revenue and earnings growth over the coming years, bolsters our confidence in the stock.

Zacks Rank & Key Picks

Omnicell currently has a Zacks Rank #3 (Hold). Better-ranked medical stocks are Glaukos Corporation GKOS, Cardiovascular Systems CSII and Neogen Corp. NEOG. Glaukos sports a Zacks Rank #1 (Strong Buy) while Cardiovascular Systems and Neogen carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Glaukos gained over 100% in the last one year in comparison to the S&P 500’s gain of 21.9%. The company has a stellar four-quarter average earnings surprise of over 100%.

Cardiovascular Systems surged over 100% in the last one year in comparison to the S&P 500. It has a four-quarter average earnings surprise of 67.8%.

Neogen gained 33.8% in the past one year, better than the S&P 500 mark. The stock has an impressive long-term earnings growth rate of 16.7% for the next five years compared to the industry average of 15.2%.

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