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Omnicom Beats by a Penny

Zacks Equity Research

Omnicom Group Inc. (OMC) posted decent operating results for the fourth quarter and fiscal 2011 on February 14, 2012.

Omnicom’s net income in the quarter grew 10.3% year over year to $271.9 million from $246.5 million in the fourth quarter of 2010. Diluted earnings per share (EPS) expanded by 15.7% from 83 cents in the year-ago quarter to 96 cents in the reported quarter. EPS also beats the Zacks Consensus Estimate by a penny.

For FY11, Omnicom's diluted earnings per share increased 23.3% to $3.33compared with diluted earnings per share of $2.70in the year-ago comparable period.

Total revenue was $3,852.9 million, up 7.4% year over year from $3,586.8 million in the corresponding quarter of the previous year. Revenue surpassed the Zacks Consensus Estimate of $3,804.0 million.

Domestic and International revenue rose 5.0% and 9.9% to reach $1,928.7 million and $$1,924.2 million, respectively.

For FY11, the company reported total revenue of $13,872.5 million, up 10.6% y/y.

Operating expenses, excluding amortization of intangibles, increased to $3,341.8 million compared with $3,127.0 million in the prior-year quarter. Operating income grew 10.9% to $487.4 million, resulting in an operating margin of about 12.7%, marginally up from 12.3% recorded in 4Q10. EBITA increased 11.2% to $511.1 million year over year.

For full-year 2011, EBITDA improved to $1,762.5 million, up from $1,531.0 million recorded in the year-ago quarter.

Omnicom’s net interest expense during the the fourth quarter 2011 was recorded at $30.3 million, down from $32.1 million in the comparable period of 2010.

Of late, Omnicom Group Inc. announced the increase of the company's quarterly cash dividend by 20%, raising it from 25 cents to 30 cents per outstanding share of the company’s common stock.

Time and again, the trend of rising consumer spending across the US and international ad market have continued to improve the company’s performance. On this backdrop, we believe Omnicom’s customized, cost effective business mix will help to expand the company’s client base while boosting its revenue further in the coming quarters.

Omnicom is one of the largest advertising, marketing and corporate communications companies in the world. It directly competes with its peers, such as 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. Omnicom has a Zacks #3 Rank, which translates into a short-termHold rating (1-3 months).

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