Omnicell: Dispensing Profits in Hospital Automation

08/03/2020 5:00 am EST

Focus: STRATEGIES

Hilary Kramer

Editor, GameChangers

Omnicell (OMCL), which makes medication dispensing automation systems, remains a buy recommendation, asserts growth stock expert Hilary Kramer, editor of GameChangers — and a participant in the upcoming MoneyShow virtual event, August 3-5. Register for free here.

Hospitals have postponed investing in OMCL’s automation systems as they continue to deal with the operational pressures and loss of revenue from COVID-19.

As OMCL provides hospitals with valuable technologies that can reduce the risk of medical errors and infections, I anticipate that the company’s growth will resume.

Omnicell just recently reported better-than-expected second-quarter results. Earnings per share (EPS) of $0.37 vs. $0.67 was $0.14 better than expectations, as sales fell 8.2%. This was better than the expected decline of 16.1%.

Management also indicated that current engagement with hospitals is much better than it was at the start of the second quarter, which likely represents the low point of the company’s COVID-19-related earnings decline.

Management also indicated that the company expects to return to 10-12% organic revenue growth once the COVID-19 crisis passes, as hospitals still desire to build autonomous pharmacies that greatly reduce the risk of medical error.

While COVID-19 remains a risk, Omnicell is heading in the right direction. While this has been a tough year for OMCL, earnings comparisons should get better, and the company has a chance to earn over $3 per share next year. This would be up an expected $2.40 this year. OMCL is a buy below $70. My target is $85.

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