Omnicom Group Inc
) is scheduled to report second-quarter 2014 results before the
opening bell on Jul 22. In the last reported quarter, the reported
earnings of the company beat the Zacks Consensus Estimate by a
penny. Let's see how things are shaping up for this
Factors to Consider
Omnicom is concentrating on strengthening its business and
expanding its client base globally through the acquisition of
complementary companies. Omnicom announced the acquisition of
U.K.-based brand and retail agency Haygrath by its subsidiary
RAPP. The integration is expected to enable RAPP gain a
better foothold in the total customer experience spectrum, by
providing expert marketing and communications solutions. Earlier in
May 2014, Omnicom's TBWA Worldwide completed the acquisition of an
independent German advertising agency Heimat for an undisclosed
amount. Heimat enhances Omnicom's portfolio with its creative
products as well as its long-term relationships with national and
international brands. We expect the company to witness increased
revenues and income on the back of these acquisitions in the
However at the same time, Omnicom and
Publicis Groupe SA
) terminated their $35 billion merger proposal, putting an untimely
stop to a deal that would have possibly created the world's largest
advertising agency. The deal was called off due to regulatory
hurdles, management conflicts and complication in finishing the
transaction within a rational time period. If the merger had been
successful, the consolidated entity would have handled eminent
Also, a significant portion of Omnicom's revenues comes from
Europe. In the present scenario, when the economy in the region is
highly unpredictable, it becomes difficult for the company to
increase revenues and reduce costs. In addition, the company is
susceptible to market risks of losing contracts related to media
purchases and production costs, which thereby affects its bottom
line and undermines its organic growth to some extent.
Our proven model does not conclusively show that Omnicom will
beat the Zacks Consensus Estimate this quarter. This is because a
stock needs to have both a positive Earnings ESP and a Zacks Rank
#1, #2 or #3 for this to happen. This is not the case here as you
will see below.
Zacks ESP: The
, which represents the difference between the Most Accurate
estimate and the Zacks Consensus Estimate, is pegged at 0.00%. This
is because both the Most Accurate Estimate and Zacks Consensus
Estimate currently stand at $1.17.
Zacks Rank #2 (Buy): Omnicom's Zacks Rank #2 (Buy) when combined
with a 0.00% ESP makes surprise prediction difficult.
We caution against stocks with Zacks Ranks #4 and #5 (Sell-rated
stocks) going into the earnings announcement, especially when the
company is seeing negative estimate revisions.
Other Stocks to Consider
Here are some companies you may want to consider as our model
shows that they have the right combination of elements to post an
earnings beat in the future.
Arch Capital Group Ltd
) earnings ESP of +5.10% and Zacks Rank #2 (Buy).
) earnings ESP of +3.73% and Zacks Rank #1 (Strong Buy).
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