Zacks_Analysts' Blog : Omnicom Beats on EPS - Analyst Blog

Omnicom Group Inc. (OMC) posted decent operating results for the third quarter of 2011 on October 18.  

Omnicom’s net income in the quarter grew 16.7% year over year to $203.7 million from $174.6 million in the third quarter of 2010. Earnings per share (EPS) expanded by 26.3% from 57 cents in the year-ago quarter to 72 cents in the reported quarter. EPS also beats the Zacks Consensus Estimate of 70 cents.

Total revenue was $3,380.9 million, up 12.9% year over year from $2,994.6 million in the corresponding quarter of the previous year. Revenue surpassed the Zacks Consensus Estimate of $3,293.0 million.

Domestic and International revenue rose 5.3% and 21.8% to reach $1,703.2 million and $1,677.7 million, respectively.

Operating expenses excluding amortization of intangibles increased to $2,983.8 million compared with $2,662.5 million in the prior-year quarter. Operating income grew 18.9% to $373.4 million, resulting in an operating margin of about 11.0%, marginally up from 10.5% recorded in 3Q10. EBITA increased 19.6% to $397.1 million year over year.

Omnicom’s net interest expense was recorded at $31.9 million, up from $29.8 million in the comparable period of 2010.

Omnicom’s customized, cost effective business mix together with acquisitions and expansion of client base remain as the key growth strategy for the company. Moreover, the trend of rising consumer spending across the US and international ad market reflect positive indication of improved performance, going forward.

Omnicom is one of the largest advertising, marketing and corporate communications companies in the world. It directly competes with its peers, such as The Interpublic Group of Companies Inc. (IPG), Publicis Groupe SA (PUBGY.PK) and WPP pl. (WPPGY). 

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