Omnicom posted a healthy beat in earnings for the second quarter of
2014, driven by organic growth across the world. Its
well-diversified business mix profited from strong demand in
developing nations such as Asia Pacific, Latin America and Africa.
Omnicom is focusing on strengthening its business and expanding its
client base globally. The increasing demand for media services,
speedy growth of technologies and massive proliferation of channels
are likely to drive the company's growth, going forward. However, a
competitive and fragmented communications services industry is
likely to limit the profitability of the company to some extent.
Hence, we reiterate our Neutral recommendation on Omnicom.
Omnicom is one of the largest advertising, marketing and
corporate communications companies in the world. The company's
agencies operate in all the major markets across the globe and
provide an extensive range of services, which are grouped into four
fundamental disciplines: 1) Traditional Media Advertising 2)
Customer Relationship Management (CRM) 3) Public Relations (PR) and
4) Specialty Communications. Except for traditional media
advertising, the other three disciplines are managed by Diversified
Agency Services (DAS), which consists of a global enterprise of
more than 100 companies providing services in promotional marketing
and specialty communications.
Traditional Media Advertising (50.2% of total revenue in second
quarter 2014): The segment includes three of the top ten global
advertising brands - BBDO Worldwide, DDB Worldwide, and TBWA
Customer Relationship Management (CRM, 33.5%): The segment
includes a range of DAS resources providing clients with CRM
services, including sports and event marketing,
branding/consultants/design, direct/relationship marketing,
promotional marketing, field marketing, non-profit marketing and
Public Relations (PR, 9.3%): This group provides services
through three of the top seven public relations firms in the world,
Fleishman-Hillard, Ketchum Pleon, and Porter Novelli International,
as well as specialist agencies including Brodeur Partners, Clark
& Weinstock, Kreab Gavin Anderson, and Cone.
Specialty Communications (7.0%): The segment offers its
specialty services through an influential global healthcare
franchise built by DAS, of which six healthcare communications
companies are ranked among the top 25.
Omnicom Group Inc. (OMC): Read the Full Research
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