Omnicom Beats, Revs Up


Omnicom Group Inc. (OMC) posted decent operating results for the first quarter of 2012 on April 17, 2012.

Omnicom’s net income in the quarter grew 1.3% year over year to $204.6 million from $201.9 million recorded in the first quarter of 2011. Diluted earnings per share (EPS) expanded by 4.3% from 69 cents in the year-ago quarter to 72 cents in the reported quarter. EPS also beats the Zacks Consensus Estimate of 69 cents.

Total revenue was $3,307.3 million, up 5.0% year over year from $3,151.3 million in the corresponding quarter of the previous year.

Domestic and International revenue rose 4.0% and 5.9% to reach $1,719.3 million and $1,588.0 million, respectively.

Operating expenses, excluding amortization of intangibles, increased to $2,920.8 million compared with $2,808.5 million in the prior-year quarter. Operating income grew 12.5% to $362.5 million, resulting in an operating margin of about 11.0%, up from 10.2% recorded in 1Q11. EBITA increased 12.7% to $386.5 million year over year.

Omnicom’s net interest expense during the first quarter of 2012 was recorded at $29.2 million, down from $32.1 million in the comparable period of 2011.

Omnicom has a strong track record of winning new clients and receiving additional deals from existing ones. The company’s business mix is well-diversified geographically and benefits largely from the growing markets.

In addition, the company’s efforts toward controlled expenses and strong global reputation are commendable. These, we believe, will ensure earnings consistency as well as growth opportunities in the upcoming quarters.

Omnicom is one of the largest advertising, marketing and corporate communications companies in the world. It directly competes with The Interpublic Group of Companies Inc. (IPG), Publicis Groupe SA (PUBGY) and WPP pl. (WPPGY). 

We currently maintain a long-term Neutral recommendation on the stock. Moreover, Omnicom holds a Zacks #3 Rank, which translates into a short-term (1-3 months) Hold rating.

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