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Omnicom (OMC) Beats Earnings and Revenue Estimates in Q2

Zacks Equity Research

Omnicom Group Inc. OMC reported solid second-quarter 2019 results wherein the company’s earnings and revenues surpassed the Zacks Consensus Estimate.

Adjusted earnings of $1.68 per share beat the consensus mark by 7 cents and increased 5% on a year-over-year basis.

Total revenues of $3.7 billion beat the consensus estimate by $8 million but decreased 3.6% year over year on a reported basis. The year-over-year decrease was due to negative foreign exchange rate impact of 2.6% and a decline in acquisition revenues, net of disposition revenues of 3.8%, offset by organic revenue growth of 2.8%.

Shares of Omnicom have gained 19% over the past year, against a 2.5% decline of the  industry it belongs to.

Let’s check out the numbers in detail.

Revenues by Segments

Advertising segment revenues of $2.1 billion increased 1.3% year over year on a reported basis and 4.4% organically. The segment accounted for 56% of total revenues in the quarter.

CRM Consumer Experience revenues of $659.5 million declined slightly year over year on a reported basis but increased 1.9% organically. The segment contributed 18% to total revenues.

CRM Execution & Support revenues of $326.1 million decreased 34.6% year over year on a reported basis and 2.6% organically. It accounted for 9% of total revenues.

PR revenues of $349.3 million declined 3.7% year over year on a reported basis and 1.3% organically. It contributed 9% to total revenues.

Healthcare revenues of $291 million were up 7.5% year over year on a reported basis and 8.4% organically. It accounted for 8% of total revenues.

Revenues by Regions

Revenues from United States came in at $2 billion, up 0.7% year over year on a reported basis and 3.2% organically. The region accounted for 54% of total revenues in the quarter.

Revenues from Other North America came in at $113.2 million, up 6.2% year over year on a reported basis and 11.8% organically. The region accounted for 3% of total revenues.

Revenues from UK came in at $361 million, down 0.7% year over year on a reported basis but up 5.7% organically. It accounted for 10% of total revenues.

Euro & Other Europe revenues of $674.9 million declined 13.4% year over year on a reported basis but improved 1.5% organically. The region contributed 18% to total revenues.

Revenues from Asia Pacific came in at $407.6 million, down 6.1% year over year on a reported basis but increased 1.9% organically. It accounted for 11% of total revenues.

Latin American revenues of $96.9 million declined 15.8% year over year on a reported basis and 2.4% organically. It contributed 3% to total revenues.

Revenues from the Middle East and Africa were $61 million, down 13.1% year over year on a reported basis and 8.3% organically. It accounted for 2% of total revenues.

Operating Results

Operating profit in the quarter decreased 1.5% year over year to $573.7 million. Operating margin increased to 15.4% from 15.1% in the year-ago quarter.

Earnings before interest, taxes and amortization (EBITA) for the reported quarter were $594.9 million, down from $609.3 million in the year-ago quarter. EBITA margin came in at 16% compared with 15.8% in the year-ago quarter.

Cash Flow

The company used $97.3 million in operating activities and generated free cash flow of $473 million in the quarter. Capital expenditures were $21.6 million.It paid $145.6 million as dividends to common shareholders.

Zacks Rank and Stocks to Consider

Currently, Omnicom carries a Zacks Rank #3 (Hold).

Some top-ranked stocks in the broader Zacks Business Services sector include Broadridge BR, EVO Payments EVOP and Visa V, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term expected EPS (three to five years) growth rate for Broadridge, EVO Payments and Visa is 10%, 13.5% and 16.5%, respectively.

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