Global marketing and corporate communications company, Omnicom Group Inc. OMC is scheduled to report third-quarter 2016 results before the opening bell on Oct 18. In the last reported quarter, the company’s earnings beat the Zacks Consensus Estimate by 2 cents. Omnicom’s earnings track record has been decent, with the company beating estimates on three occasions in the four trailing quarters, posting an average beat of 1.76%.
Let's see how things are shaping up for the upcoming third-quarter results.
Key Factors in the Third Quarter
Omnicom is concentrating on strengthening its business and expanding its client base globally through the acquisition of complementary companies. These accretive acquisitions have enabled the company to build a diversified presence across the world.
During the quarter, Omnicom launched custom designed growth-hacking marketing agency, KERN X. As part of Omnicom's KERN group, the KERN X agency will provide startups an enhanced marketing investment outlook backed by original design and deployment of over 30,000 original promotions for its customers. These customers will be provided with exclusive strategies based on their business and modern digital marketing. Such advanced services will help the startups grow at an accelerated pace as well as understand the complex needs of the buyers. Omnicom is likely to set itself apart from its peers and see improvement in its top-line growth in the to-be-reported quarter’s results.
In order to spur growth, Omnicom has started using open-source technique to access the current information in the market. The increasing demand for media services, speedy growth of technologies and massive proliferation of channels are likely to translate into incremental revenues in the future.
As the second biggest global advertising and marketing service agency group, Omnicom has an extensive geographic footprint, high client retention, along with a huge and diverse customer base. Despite a challenging macroeconomic environment, Omnicom is expected to grow at a moderate pace in 2016 and the third quarter is not likely to be an exception.
In addition, Omnicom is also experiencing healthy performance in the developed markets like the U.S. and developing markets like Asia. The stringent cost-reduction initiatives have helped to boost earnings. The company is expanding its global footprint and is moving into new service areas. It is also building upon its digital and analytical capabilities by investing in agencies and partnering with innovative technology companies in key markets to lower its dependence on any single product.
Our proven model conclusively shows that Omnicom is likely to beat earnings this quarter as it comprises the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is the case here as you will see below:
Zacks ESP:Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently +0.97%.
Zacks Rank:Omnicom’s Zacks Rank #2 when combined with a positive ESP makes an earnings beat likely this quarter.
Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some other companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
MGIC Investment Corp. MTG with an Earnings ESP of +17.65% and a Zacks Rank #3.
Johnson & Johnson JNJ with an Earnings ESP of +4.88% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Synovus Financial Corporation SNV, with an Earnings ESP of +2% and a Zacks Rank #3.
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