Omnicell Beats by a Penny - Analyst Blog

Omnicell Inc. (OMCL) reported third quarter 2010 earnings per share (EPS) of 11 cents, surpassing the year-ago quarter's 10 cents. After adjusting for stock-based compensation expenses, EPS was 4 cents, closely beating both the Zacks Consensus Estimate of 2 cents and year-ago quarter's earnings of 3 cents.

Revenue in the quarter increased 4% year over year and 3% sequentially to $56.3 million, marginally beating the Zacks Consensus Estimate of $56.0 million. Total revenue included 2.9% and 2.4% increases in revenues from Products ($43.2 million) and Services and Others ($13.0 million), respectively.

Gross margin expanded 90 bps to 69.7% in the third quarter 2009, as cost of sales increased 1.6% to $26.2 million. A 24.5% increase in research and development expenses ($6.1 million), coupled with a 2.5% decline in selling, general and administrative expenses ($19.9 million) led to a 6.7% increase in operating expenses to $27.1 million.

At the end of the reported quarter, cash and cash equivalents were $178.6 million, up from $169.2 million at the end of December 2009.

Omnicell is aiming toward restructuring its operations to improve manufacturing efficiency and reduce costs. During the third quarter, Omnicell acquired Pandora Data Systems, which provides analytical software for medication diversion detection and regulatory compliance. Omnicell expects $2−$3 million in annual revenue from Pandora from fiscal 2010 and the deal will add to its profits beginning 2011.

Going forward, Omnicell expects to develop products by incorporating new technologies to capture more market share from its competitors and win more deals together with expanding its foothold in the international market. We believe the company is well positioned to expand its presence in the under-penetrated markets. The recent Pandora acquisition also strengthens our view. Presently, we are ‘Outperform' on Omnicell.