Global marketing and corporate communications firm Omnicom Group Inc. OMC reported solid first-quarter 2017 results, with year-over-year increases in revenues and earnings on modest organic growth. Net income for the reported quarter was $241.8 million or $1.02 per share compared with $218.4 million or 90 cents per share in the year-ago quarter. The significant year-over-year increase in earnings was primarily attributable to top-line growth.
Excluding non-recurring items, adjusted earnings for the reported quarter were 97 cents per share compared with 90 cents in the year-earlier quarter. Adjusted earnings for the reported quarter marginally beat the Zacks Consensus Estimate by a penny.
Revenues improved 2.5% year over year to $3,587.4 million and exceeded the Zacks Consensus Estimate of $3,564 million. Higher revenues for the reported quarter were primarily driven by a 4.4% rise in organic growth. Acquisitions, net of dispositions led to a 0.7% decrease in revenues, while adverse foreign exchange rates further led to a 1.2% decline on a year-over-year basis.
By business discipline, revenues for Advertising were up 6.5% year over year to $1,920.8 million; CRM (customer relationship management) revenues decreased 4.4% year over year to $1,071.0 million; PR (public relations) revenues of $325.3 million increased 2% on a year-over-year basis; and Specialty revenues of $270.3 million increased 5.3% year over year.
Across regional markets, North America revenues improved 0.8% year over year to $2,139.3 million. Asia Pacific recorded a 5.8% increase in revenues to $375 million, Euro & Other Europe improved 4.6% to 578.4 million, while the U.K. saw a decline of 8.2% to $309.2 million. Revenues from Latin America saw a significant increase of 41.6% year over year to $106.6 million, while that of Middle East and Africa improved 39.4% to $78.9 million.
Operating income for the first quarter was $409.9 million compared with $392.1 million in the year-ago quarter for respective margins of 11.4% and 11.2%. Earnings before interest, taxes and amortization or EBITA for the reported quarter were $440.3 million, up from $420.4 million in the year-earlier quarter.
Balance Sheet & Cash Flow
Omnicom generated free cash flow of $355.3 million for the reported quarter compared with $353.1 million in the prior-year period. The company had a total debt of $4,943 million at quarter end, with cash and short-term investments of $2,486 million.
For the twelve months ended Mar 31, 2017, return on invested capital (ROIC) and return on equity (ROE) aggregated 21.8% and 52.0%, respectively. During the period from 2007 through Mar 31, 2017, Omnicom distributed 107% of net income to shareholders through dividends and share repurchases.
Omnicom has a track record of strengthening its business and expanding its global client base through acquisition of complementary companies. We remain encouraged by the healthy quarterly results of the company and its continued acquisition spree.
Omnicom currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include Navigant Consulting, Inc. NCI, The Interpublic Group of Companies, Inc. IPG and Exponent Inc. EXPO, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Navigant has a long-term earnings growth expectation of 12.5%. It topped estimates in each of the trailing four quarters with an average positive earnings surprise of 23.16%.
Interpublic has a long-term earnings growth expectation of 11.6%. It surpassed estimates thrice in the trailing four quarters with an average positive earnings surprise of 31.09%.
Exponent has a long-term earnings growth expectation of 12%. It topped estimates thrice in the trailing four quarters with an average positive earnings surprise of 9.35%.
5 Trades Could Profit "Big-League" from Trump Policies
If the stocks above spark your interest, wait until you look into companies primed to make substantial gains from Washington's changing course.
Today Zacks reveals 5 tickers that could benefit from new trends like streamlined drug approvals, tariffs, lower taxes, higher interest rates, and spending surges in defense and infrastructure. See these buy recommendations now >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Zacks Investment Research