Earnings Preview: Omnicom Group - Analyst Blog

Omnicom Group Inc. (OMC) will report its first quarter 2012 earnings on Tuesday, April 17, 2012.

The current Zacks Consensus Estimate for earnings per share ( EPS ) is 69 cents, representing an annualized loss of 0.11%.

With respect to earnings surprises, over the trailing four quarters, OMC outperformed the Zacks Consensus Estimate in all the quarters. The average earnings surprise was 6.30%, implying that the company outperformed the Zacks Consensus Estimate by the same magnitude over the last four quarters.

Fourth-Quarter and Fiscal 2011 Highlights

On February 14, Omnicom Group Inc. posted decent operating results for the fourth quarter and fiscal 2011.

Omnicom's net income in the quarter grew 10.3% year over year to $271.9 million from $246.5 million in the fourth quarter of 2010. Diluted earnings per share ( EPS ) increased by 15.7% from 83 cents in the year-ago quarter to 96 cents in the reported quarter. Earnings per share also beat the Zacks Consensus Estimate by a penny.

For FY11, Omnicom's diluted earnings per share increased 23.3% to $3.33 compared with diluted earnings per share of $2.70 in the year-ago comparable period.

Total revenue was $3,852.9 million, up 7.4% year over year from $3,586.8 million in the corresponding quarter of the previous year. Revenue surpassed the Zacks Consensus Estimate of $3,804.0 million.

Domestic and International revenue rose 5.0% and 9.9% to reach $1,928.7 million and $1,924.2 million, respectively.

For FY11, the company reported total revenue of $13,872.5 million, up 10.6% y/y.

Agreement of Estimate Revisions

In the last 30 days, three analysts increased the company's EPS estimate for the first quarter of 2012 while two analysts decreased the same for the quarter. Also, for fiscal 2012, three analysts raised their estimate while two decreased the same. For fiscal 2013, two analysts raised their estimate in the last 30 days, while 2 lowered the same.

Magnitude of Estimate Revisions

Estimates, over the last 30 days, remained static at 69 cents per share for the first quarter of 2012, representing a year-over-year decline of 0.11%.

Earnings per share estimates for fiscal 2012 remained static at $3.67 over the last 30 days. For fiscal 2013, the average remained static at $4.09 per share. These estimates represented a year-over-year growth of 10.27% for 2012 and 11.33% for 2013.

Our Take

We remain cautious on the stock based on the intense pricing pressures worldwide and client spending cuts.. Increased acquisition expenses also pose a risk for Omnicom. However, we are likely to see controlled expenses, which may encourage margin consistency compared to its peers, such as The Interpublic Group of Companies Inc. ( IPG ), Publicis Groupe SA ( PUBGY ) and WPP plc ( WPPGY ).

We currently maintain a long-term 'Neutral' recommendation on the stock. Also, Omnicom carries a Zacks #3 Rank, which translates into a short-term (1-3 months) 'Hold' rating.

INTERPUBLIC GRP ( IPG ): Free Stock Analysis Report

OMNICOM GRP ( OMC ): Free Stock Analysis Report

PUBLICIS GP-ADR ( PUBGY ): Free Stock Analysis Report

WPP PLC ( WPPGY ): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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