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Omnicom Group (OMC) Beats on Q3 Earnings & Revenues

Zacks Equity Research
Updated

Despite a challenging macroeconomic environment, global marketing and corporate communications firm Omnicom Group Inc. OMC reported relatively healthy third-quarter 2016 results, driven by modest organic growth. Net income for the reported quarter was $252.6 million or $1.06 per share versus $236.8 million or 97 cents in the year-ago quarter. Earnings for the reported quarter beat the Zacks Consensus Estimate by 3 cents.

Revenues

Revenues improved 2.3% to $3,791.1 million from $3,706.6 million in the year-ago quarter and beat the Zacks Consensus Estimate of $3,784 million. Higher revenues for the reported quarter were primarily driven by a 3.2% rise in organic growth. Acquisitions, net of dispositions led to a 0.4% increase in revenues, partially offset by adverse foreign exchange rates of 1.3% on a year-over-year basis.
 

By business discipline, revenues for Advertising were up 3.6% year over year to $1,972.8 million; CRM (customer relationship management) revenues decreased 1.4% year over year to $1,203.8 million; PR (public relations) revenues of $347.6 million increased 5.5% on a year-over-year basis; and Specialty revenues of $266.9 million increased 5.9% year over year.

Across regional markets, North America reported a 1.4% growth in revenues to $2,253.9 million. Asia Pacific recorded an 8.3% increase in revenues to $418.9 million, Euro & Other Europe improved 2% to 590.7 million, while the U.K. saw a decline of 10.4% to $347.9 million. Revenues from Latin America saw a significant increase of 60% ($112.5 million) year over year, while that of Middle East and Africa increased 11.3% to $67.2 million.

Operating income for the third quarter was $453.1 million compared with $428.3 million in the year-ago quarter for respective margins of 12% and 11.6%. Earnings before interest, taxes and amortization or EBITA for the reported quarter were $482.1million.

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Balance Sheet & Cash Flow

Omnicom generated free cash flow of $1,100.7 million for the nine months ended Sep 30, 2016, versus $1,137.9 million in the prior-year period. The company had a total debt of $5,032 million as of Sep 30, 2016, compared with $4,598 million in the year-ago period. Cash from operating activities for the first nine months of 2016 were $316.6 million.

OMNICOM GRP Price, Consensus and EPS Surprise

 

OMNICOM GRP Price, Consensus and EPS Surprise | OMNICOM GRP Quote

Moving Forward

Omnicom has a track record of strengthening its business and expanding its global client base through acquisition of complementary companies. We remain encouraged by the healthy quarterly results of the company and its continued acquisition spree.

Omnicom currently has a Zacks Rank #2 (Buy). Some other stocks worth a glance in the industry include Harte-Hanks Inc. (HHS), Social Reality, Inc. (SRAX) and Acacia Research Corporation (ACTG), each carrying the same Zacks Rank as Omnicom.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Acacia Research Corporation ACTG has a modest earnings record, beating estimates once in the four trailing quarters, with an average positive surprise of 92.86%. The company’s share price has increased by approximately 39.86% year to date.

Social Reality, Inc. SRAX has a dismal earnings record, missing estimates once by a dramatic margin in the four trailing quarters, with an average negative surprise of 11.11%.

Harte-Hanks Inc. HHS has a dismal earnings record, missing estimates thrice in the four trailing quarters, with an average negative surprise of 211.74%. The company’s share price has declined by approximately 52.16% year to date.

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OMNICOM GRP (OMC): Free Stock Analysis Report
 
HARTE-HANKS INC (HHS): Free Stock Analysis Report
 
ACACIA RESEARCH (ACTG): Free Stock Analysis Report
 
SOCIAL REALITY (SRAX): Free Stock Analysis Report
 
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Zacks Investment Research