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Omnicom (OMC) to Report Q3 Earnings: Is a Beat in Store?

Zacks

Omnicom Group Inc. OMC is scheduled to report third-quarter 2018 results on Oct 16, before the opening bell.

While we expect the company’s top line to be hurt by a decrease in acquisition revenues, net of disposition revenue, the bottom line is likely to do well on the back of lower U.S tax rates.

So far this year, shares of Omnicom have declined 6.6% against the 4.1% rise of the Zacks S&P 500 Composite.


Top Line to Decline Year Over Year

The Zacks Consensus Estimate for third-quarter revenues is pegged at $3.70 billion, indicating year-over-year decrease of 0.6%. The top line is expected to be hurt by a decrease in acquisition revenues, net of disposition revenue, which is likely to be partially offset by higher organic revenue growth and positive impact of changes in foreign currency rates.

The Zacks Consensus Estimate indicates an organic revenue growth of 2.6% in the to-be reported quarter. The consensus estimate for acquisition revenues indicates a year over year decline of 1.3%.

In second-quarter 2018, the company’s revenues increased 1.8% year over year. While organic revenue growth was 2% in the quarter, acquisition revenues, net of dispositions declined 1%.

Earnings Likely to Grow on Tax Reform Policy

TheU.S. Tax Cuts and Jobs Act (TCJA), which reduced corporate tax rates significantly, should benefit Omnicom’s earnings in the to-be-reported quarter. Notably, the consensus estimate for earnings per share (EPS) is pegged at $1.21, indicating year-over-year growth of 7.1%.

In second-quarter 2018, earnings rose 14.3% from the year-ago quarter to $1.60 per share.

Our Model Suggests a Beat

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided, especially if they have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Omnicom has an Earnings ESP of +0.83% and a Zacks Rank #3, a combination that increases the odds of an earnings beat.

Omnicom Group Inc. Price and EPS Surprise

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

Other Stocks to Consider

Here are a few stocks from the broader Business Services sector that investors may consider, as our model shows that these also have the right combination of elements to beat on earnings in third-quarter 2018:

WEX WEX has an Earnings ESP of +0.54% and a Zacks Rank #2. The company is expected to report results on Nov 7. You can see the complete list of today’s Zacks #1 Rank stocks here.

TransUnion TRU has an Earnings ESP of +3.54% and a Zacks Rank #3. The company is slated to release results on Oct 23.

Republic Services RSG has an Earnings ESP of +0.31% and a Zacks Rank #3. The company is scheduled to report results on Oct 25.

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