Surging Earnings Estimates Signal Upside for Omnicell (OMCL) Stock

Clover Health Investments, Corp. CLOV is scheduled to report third-quarter 2024 results on Nov. 6, after the closing bell.

In the last reported quarter, the company delivered earnings per share of a penny against the Zacks Consensus Estimate of a loss of 4 cents. Over the trailing four quarters, its earnings outperformed the Zacks Consensus Estimate on each of the four occasions, delivering an earnings surprise of 49.2%, on average.

For third-quarter 2024, the Zacks Consensus Estimate for revenues is pegged at $347.6 million, implying a decline of 27.9% from the prior-year quarter’s reported figure. The consensus estimate for loss per share is pegged at 3 cents compared with the prior-year period’s loss of 9 cents per share.

CLOV Estimate Movement

Earnings estimates for Clover Health’s 2024 earnings have remained flat at a loss of 13 cents in the past 60 days.

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• Omnicell stock increased 23.22% after the company reported third-quarter results and raised its FY24 guidance above estimates. Analysts upped the price forecast on the stock.

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Omnicell, Inc. OMCL reported third-quarter 2024 adjusted earnings per share (EPS) of 56 cents, which declined 9.7% year over year. However, the metric beat the Zacks Consensus Estimate by 36.6%.

Adjustments include one-time expenses like share-based compensations, the amortization of acquired intangibles, acquisition-related expenses and RDS restructuring.

GAAP EPS was 19 cents, up 58.3% from the 2023 figure.

Find the latest EPS estimates and surprises on Zacks Earnings Calendar.

Following the announcement, OMCL shares jumped 32.2% yesterday, finishing the session at $53.05.

Omnicell’s Q3 Revenues

Revenues totaled $282.4 million, down 5.4% year over year. However, the figure beat the Zacks Consensus Estimate by 1.6%.

Segmental Analysis of Q3 Revenues

On a segmental basis, Product revenues declined 16.1% year over year to $158.4 million in the reported quarter. Our model’s projected revenues for this segment were $159.4 million.

Omnicell, Inc. Price, Consensus and EPS Surprise

Omnicell, Inc. price-consensus-eps-surprise-chart | Omnicell, Inc. Quote

Service and other revenues climbed 12.9% year over year to $124.1 million. Our model estimate was $117.7 million.

Margin Performance

In the quarter under review, the gross profit declined 7.4% year over year to $122.3 million. The gross margin contracted 89 basis points (bps) to 43.4% despite a 4% decline in the cost of revenues.

Operating expenses amounted to $115.7 million, down 9.8% year over year. The operating profit in the quarter totaled $6.6 million, down 76.8% year over year. The operating margin expanded 108 basis points to 2.3%.

Omnicell exited the third quarter of 2024 with cash and cash equivalents of $570.6 million compared with $556.8 million at the end of the second quarter of 2024.

The cumulative cash flow provided by operating activities at the end of the third quarter was $131.4 million compared with $142.7 million in the year-ago period.

OMCL’s Updated 2024 Outlook

Omnicell updated its financial outlook for 2024.

Total revenues are expected to be $1.10-$1.11 billion (versus the previously mentioned $1.07-$1.11 billion). Of this, product revenues are expected to be $625-$630 million (previously $610-$630 million) and service revenues are anticipated to be $475-$480 million (previously $460-$480 million). The Zacks Consensus Estimate for total revenues is pegged at $1.08 billion.

The adjusted EPS for the year is expected to be $1.65-$1.72 (up from the previously stated $1.20-$1.50). The Zacks Consensus Estimate is pegged at $1.40.

For the fourth quarter of 2024, Omnicell expects revenues of $295-$305 million, including product revenues of $177-$182 million and service revenues of $118-$123 million. The Zacks Consensus Estimate for fourth-quarter 2024 revenues is pegged at $278.1 million.

The adjusted EPS for the fourth quarter is expected between 55 cents and 62 cents. The Zacks Consensus Estimate is pegged at 41 cents.

Our Take on OMCL

Omnicell delivered earnings and revenue beat in the third quarter of 2024. The company demonstrated consistent financial strength, with results within or surpassing its guidance. The expansion of the operating margin is highly encouraging. The revised 2024 EPS guidance also brings optimism. As the macroeconomic environment within the healthcare sector shows signs of stabilization, Omnicell’s outcome-centric innovation and customer-first focus are resonating with the market.

In the quarter, the company announced the Central Med Automation Service to streamline medication dispensing throughout the entire health system enterprise by integrating robotics, smart devices and intelligent software with expert services. Omnicell’s multi-year XT Amplify innovation program is also gaining market momentum, with several new customers choosing these offerings to maximize value across their health systems. Beside these, advanced Services delivered another quarter of a solid performance.

On the flip side, revenues were down year over year, reflecting the impacts of a continued challenging environment for some of Omnicell’s health system customers and the timing of the XT Series automated dispensing systems lifecycle.

Zacks Rank & Other Key Picks

Omnicell currently carries a Zacks Rank #1 (Strong Buy).

Some other top-ranked stocks from the broader medical space are Quest Diagnostics DGX, Intuitive Surgical ISRG and Boston Scientific Corporation BSX.

Quest Diagnostics reported third-quarter 2024 adjusted earnings of $2.30, which topped the Zacks Consensus Estimate by 1.8%. Revenues of $2.49 billion beat the consensus mark by 3.4%. DGX carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

DGX’s 2024 earnings are expected to rise 2.1%. The company’s earnings surpassed estimates in the trailing four quarters, the average surprise being 3.3%.

Intuitive Surgical, carrying a Zacks Rank #2, posted a third-quarter 2024 EPS of $1.84, topping the Zacks Consensus Estimate by 11.5%. Revenues of $2.04 billion surpassed the Zacks Consensus Estimate by 1.2%.

ISRG has an estimated 2024 earnings growth rate of 20.1% compared with the industry’s 13.8%. The company’s earnings surpassed estimates in the trailing four quarters, the average surprise being 10.9%.

Boston Scientific, currently carrying a Zacks Rank #2, reported third-quarter 2024 adjusted earnings of 63 cents per share, which surpassed the Zacks Consensus Estimate by 8.6%. Revenues of $4.21 billion topped the Zacks Consensus Estimate by 4.5%.

BSX has an estimated 2024 earnings growth rate of 17.6% compared with the industry’s 11.5% rise. The company’s earnings surpassed estimates in the trailing four quarters, the average surprise being 7.2%.

Zacks Investment Research

Shares of Omnicell (OMCL) have been strong performers lately, with the stock up 25.4% over the past month. The stock hit a new 52-week high of $55.75 in the previous session. Omnicell has gained 41% since the start of the year compared to the 4.2% move for the Zacks Medical sector and the -47.6% return for the Zacks Medical Info Systems industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on October 30, 2024, Omnicell reported EPS of $0.56 versus consensus estimate of $0.41 while it beat the consensus revenue estimate by 1.57%.

Valuation Metrics

Omnicell may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.

Omnicell has a Value Score of C. The stock's Growth and Momentum Scores are B and D, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 37.8X current fiscal year EPS estimates, which is not in-line with the peer industry average of 37.8X. On a trailing cash flow basis, the stock currently trades at 16.9X versus its peer group's average of 6.2X. Additionally, the stock has a PEG ratio of 26.83. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Omnicell currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Omnicell fits the bill. Thus, it seems as though Omnicell shares could still be poised for more gains ahead.

Zacks Investment Research