On Jan 14, 2014, we have reaffirmed our long-term Neutral
Omnicom Group Inc.
). Omnicom focuses on strengthening its business while 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 prevents us from being too bullish on this
stock. Hence, we have taken a sideline stance on Omnicom.
Why at Neutral?
Omnicom is experiencing continuous revenue growth, driven by
healthy performance in developed markets such as the U.S. and
developing markets such as Asia and Latin America. The measures
undertaken by the company to reduce costs have also helped it to
boost earnings. The company is expanding its global footprint and
moving into new service areas. Omnicom is also building upon its
digital and analytical capabilities by investing in agencies and
partnering with innovative technology companies in key markets.
On the operational front, Omnicom offers cost-effective marketing
services in the field of advertising, which is expected to
improve margins in 2013 and beyond.
However, Omnicom operates in a highly competitive market, where
it faces competition from big service providers as well as from
companies which are new to the industry. Both these entities are
trying to profit from the high growth industry. In order to
maintain and increase its market share, the company has to incur
huge expenses. In addition, Omnicom is facing concentration risk
as it relies on a few big clients for its businesses.
Other Stocks to Consider
Omnicom currently has a Zacks Rank #4 (Sell). Stocks that look
promising in the industry include
Clear Channel Outdoor Holdings Inc.
) carrying a Zacks Rank #1 (Strong Buy), and
Huron Consulting Group Inc.
), both carrying a Zacks Rank #2 (Buy).
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OMNICOM GRP (OMC): Free Stock Analysis Report
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