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Omnicom Posts In-Line 2Q Earnings

Zacks Equity Research

Omnicom Group Inc (OMC) reported second quarter 2013 net income of $289.5 million or $1.09 per share compared with $282.7 million or $1.02 in the year-earlier quarter. Higher domestic revenues led to the increase in earnings. The results were in line with the Zacks Consensus Estimate.

Quarterly revenues climbed 2.1% to settle at $3,637.0 million but missed the Zacks Consensus Estimate of $3,658.0 million. From a geographical perspective, domestic revenues accounted for 52.4% of the total revenue and rose 2.4% to reach $1,904.0 million. International revenues (representing the remainder 47.6%) increased 1.9% year over year to $1,733.0 million.

Earnings before interest, taxes and amortization (:EBITA) for the reported quarter improved 3.4% year over year to $548.3 million, while operating income rose 3.3% to $523.0 million.

Based on disciplines, Advertising revenues grew 3.2% to $1,759.6 million in second quarter 2013; CRM (customer relationship management) revenues decreased 1.5% year over year to $1,255.4 million; PR (public relations) revenues of $336.1 million were up 4.3% year over year; and Specialty revenues of $285.9 million jumped 9.8%.

Omnicom generated free cash flow of $702.2 million for six months ended Jun 30, 2013, up from $664.1 million for the same period in the previous year. The company had a total debt of $4,051 million at quarter-end, compared with $3,939 million in the year-ago period. Cash and short-term investments aggregated $1,415 million at quarter-end compared with $1,680 million in the prior year. Return on equity (:ROE) for twelve months ended Jun 30, 2013 was 31.8% compared with 28.2% for the same period in the preceding year.

The company declared a quarterly payment of 40 cents per share. The second quarter 2013 dividend was paid on Jul 11 to shareholders of record as of Jun 14.

Omnicom also has a share repurchase program in place, under which it repurchased shares worth $492.3 million for six months ended Jun 30, 2013, Omnicom has consistently returned significant cash to its shareholders. Since 2002 and till the quarter end, Omnicom distributed 100% of net income to shareholders through dividends and share repurchases.

Omnicom has a strong track record of winning new clients and receiving additional deals from the existing ones. The company’s business mix is well diversified geographically and benefits largely from the growing markets. In addition, the company’s efforts in maintaining strong global reputation are commendable.

Omnicom currently has a Zacks Rank #3 (Hold). Other stocks that look promising and are worth a look in the industry include AirMedia Group Inc. (AMCN), Harte-Hanks Inc. (HHS) and Huron Consulting Group Inc (HURN), each carrying a Zacks Rank #2 (Buy).

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Read the Full Research Report on HURN

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Read the Full Research Report on AMCN

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