Here's Why You Should Retain Omnicom Group (OMC) for Now
Omnicom Group Inc. OMC, with its diversified presence in advertising and marketing, improves adaptability in a dynamic industry. A rising current ratio signals a positive outlook. The company's expansive global presence exposes it to potential risks arising from currency exchange rate fluctuations.
Factors in Favor
Omnicom remains dedicated to its internal growth strategies, with a strong emphasis on enhancing operational efficiency. The company has been actively allocating resources toward real estate, back-office services, procurement, and IT to drive this objective. Additionally, investments are being made in the areas of data, analytics, and precision marketing. As a result of these favorable developments, we anticipate that Omnicom will experience increased revenues due to organic growth.
Omnicom's current ratio (a measure of liquidity) at the end of the second quarter of 2023 was pegged at 0.96, which is higher than the current ratio of 0.95 in the year-ago reported quarter. Increasing current ratio indicates the company is not likely to face any problem in meeting its short-term debt obligations.
Omnicom Group Inc. Revenue (TTM)
Omnicom Group Inc. revenue-ttm | Omnicom Group Inc. Quote
Omnicom has a reliable track record of delivering value to its shareholders through dividends and share buybacks. In 2022, the company distributed $581.1 million in dividends and repurchased shares totaling $611.4 million. In 2021, Omnicom paid out $592.3 million in dividends and conducted share repurchases of $527.3 million. In 2020, it allocated $562.7 million for dividends and invested $222 million in share repurchases. These actions not only inspire investor confidence but also have a favorable impact on earnings per share.
Key Risk
In 2022, Omnicom, a global corporation, generated about 48% of its revenues from international operations. It has a significant presence in key international markets like the Eurozone, the United Kingdom, Australia, Brazil, Canada, China, and Japan. Omnicom conducts business in more than 50 different currencies apart from the U.S. dollar. However, this extensive global footprint also exposes the company to risks related to fluctuations in foreign exchange rates. In 2022, these fluctuations resulted in a $681 million or 4.8% reduction in revenues.
Zacks Rank and Stocks to Consider
OMC currently holds a Zacks Rank #3 (Hold).
The following better-ranked stocks from the Business Services sector are worth consideration:
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Automatic DataADP currently has a Zacks Rank of 2. It outpaced the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 3.1%. The consensus estimate for fiscal 2023 revenues and earnings implies growth of 8.4% and 11.1%, respectively.
BroadridgeBR currently carries a Zacks Rank of 2. It surpassed the Zacks Consensus Estimate in two of the trailing four quarters, missed once and matched on one instance, the average surprise being 0.5%. The consensus estimate for fiscal 2024 revenues and earnings predicts growth of 9.3% and 8.8%, respectively.
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