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Omnicom (OMC) Surpasses Q1 Earnings and Revenue Estimates

Zacks

Omnicom Group Inc. OMC reported strong first-quarter 2018 results with revenues and earnings surpassing the Zacks Consensus Estimate.

Earnings of $1.14 per share beat the consensus mark by 9 cents and increased 11.8% year over year.

The new tax law (Tax Cuts and Jobs Act, effective from December 2017), which reduced corporate tax rates significantly from 35% to 21%, proved beneficial for Omnicom’s earnings in the reported quarter. The company enjoyed a lower income tax rate of 24.3% in the reported quarter compared with 29.2% in the year-ago quarter. Further, successful resolution of foreign tax claims led to a $13 million reduction in income tax expense in the quarter.

Omnicom has a track record of strengthening its business and expanding its global client base through acquisition of complementary companies. Further, the company’s efforts to stay technologically updated to meet varying customer and client demands in areas of digital media, data as well as analytics look impressive. We remain encouraged by the healthy quarterly results of the company.


We observe that shares of Omnicom have depreciated 11.3% over the past year against the S&P 500’s gain of 14.6%.

Let’s check out the numbers.

Revenues

Omnicom’s first-quarter 2018 revenues of $3,629.6 million beat the Zacks Consensus Estimate of $3,613 million. The figure was up 1.2% year over year. The year-over-year increase was backed by favorable foreign exchange rate impact of 4.2% and organic growth of 2.4%. These were, however, partially offset by a decrease in acquisitions revenues, net of dispositions of 4.2%. Moreover, adoption of ASC 606 resulted in a 1.2% decrease in revenues.

Revenues by Segment

Advertising segment revenues of $1,901.3 million decreased 1.4% year over year. The segment accounted for 52.4% of total revenues in the reported quarter.

CRM Execution & Support revenues increased 3.9% year over year to $508.6 million. It accounted for 14% of total revenues.

CRM Consumer Experience revenues surged 3.5% year over year to $634.9 million. The segment contributed 17.5% to total revenues.

PR (public relations) revenues of $346.3 million improved 3.3% on a year-over-year basis. It accounted for 9.5% of total revenues.

Healthcare revenues of $238.5 million were up 8.2% year over year. It contributed 6.6% of total revenues.

Revenues by Regions

Across regional markets, North America revenues reduced 7.2% year over year to $1,985.7 million while that of Latin America increased 1.7% year over year to $108.4 million. Asia Pacific recorded a 4.5% increase in revenues to $392 million, Euro & Other Europe improved 23.1% to $712.1 million and the U.K. recorded a 15.8% improvement to $358 million. However, revenues from the Middle East and Africa were down 7% to $73.4 million.

Operating Results

Operating profit in first-quarter 2018 increased 1.4% year over year to $421.7 million. Operating margin of 11.6% was same with the year-ago quarter. Operating expenses of $3,207.9 million were up 1.1% from the year-ago quarter.

Net income of $264.1 million for the reported quarter increased 9.2% year over year.

Earnings before interest, taxes and amortization or EBITA for the reported quarter were $449.2 million, up from $446.1 million in the year-ago quarter. EBITA margin remained constant with the year-ago quarter figure of 12.4%.

Omnicom Group Inc. Price, Consensus and EPS Surprise

Omnicom Group Inc. Price, Consensus and EPS Surprise | Omnicom Group Inc. Quote

Balance Sheet & Cash Flow

Omnicom generated free cash flow of $375.3 million in first-quarter 2018 compared with $355.3 million in the prior-year period. The company had a total debt of $4,894 million at the end of the reported quarter with cash, cash equivalents and short-term investments of $2,570 million compared with a respective $4,943 million and $2,486 million in 2017.

For the twelve months ended Mar 31, 2018, return on invested capital (ROIC) and return on equity (ROE) aggregated 21.3% and 46.7%, respectively. During the period from 2008 through Mar 31, 2018, Omnicom distributed 106% of net income to shareholders through dividends and share repurchases.

Zacks Rank & Upcoming Releases

Omnicom currently has a Zacks Rank #3 (Hold).You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Investors interested in the broader Business Services sector are keenly awaiting first-quarter earnings reports from key players like Mastercard Incorporated MA, The Brink’s Company BCO and FLEETCOR Technologies, Inc. FLT. While Mastercard and Brink’s Company are slated to report quarterly numbers on May 2 and Apr 25, respectively, FLEETCOR is expected to report quarterly numbers on May 7.

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