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UPDATE 2-Omnicom beats revenue estimates as N.America demand recovers
October 17, 2017 / 11:08 AM / 2 months ago

UPDATE 2-Omnicom beats revenue estimates as N.America demand recovers

(Adds share price, analyst comment)

By Arjun Panchadar and Sheila Dang

Oct 17 (Reuters) - Omnicom Group Inc’s third-quarter revenue topped analysts’ estimates, as the advertising group benefited from surprisingly strong demand in North America and the impact of a weaker dollar.

Shares of New-York based Omnicom, one of the world’s “Big Four” traditional advertising companies, rose 5 percent to $77.54 in morning trading on Tuesday.

Omnicom’s organic revenue from North America rose 2.1 percent in the quarter ended Sept. 30, marking the best performance in more than a year and better than analysts’ expectations of 1.1 percent, according to research firm FactSet.

Spending by many U.S. companies on advertising had in recent quarters been muted as businesses awaited clarity on many of President Donald Trump’s proposed policies including an overhaul of corporate taxes.

Omnicom, which counts McDonald’s Corp, Apple Inc and Adidas among its biggest clients, said customers in its media, healthcare and events businesses were contributing to revenue growth.

Analysts, however, said it would be difficult for Omnicom’s U.S. peers such as Interpublic Group to grow organic revenue at a similar clip.

Still, shares of Interpublic rose 5.3 percent to $21.77 in morning trading.

A weaker dollar also helped Omnicom rake in higher overseas revenue, adding 1 percent to overall revenue growth.

Revenue could also have been boosted by consumer goods companies which set higher marketing budgets following months of tempered spending in the face of mounting competition from Amazon and other online retailers, said Evercore ISI analyst David Joyce.

Europe was another bright spot for Omnicom, with organic revenue from that market climbing 7.8 percent in the third quarter.

Omnicom, which owns the ad agency behind the iconic “Got Milk?” campaign of the 1990s, is still adjusting to the rise of Google and Facebook, which have transformed the industry by using data to better target consumers.

The company’s total revenue dipped 1.9 percent to $3.72 billion in the third quarter, hurt in part by competition from consulting firms such as Accenture and IBM, which have in recent years built sizeable marketing divisions through aggressive acquisitions.

Analysts on average had expected Omnicom to post revenue of $3.69 billion, according to Thomson Reuters I/B/E/S.

Net income attributable to Omnicom rose to $263.6 million or $1.13 per share, from $253.8 million or $1.06 per share. Analysts had expected $1.10 per share.

Profit was also helped by a lower income tax rate. (Reporting by Arjun Panchadar in Bengaluru and Sheila Dang in New York; Editing by Sai Sachin Ravikumar)

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