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Can Omnicom (OMC) Beat Q2 Earnings on Inorganic Growth?
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Global marketing and corporate communications company Omnicom Group Inc. (OMC - Free Report) is scheduled to report second-quarter 2016 results before the opening bell on Jul 14. In the last reported quarter, earnings comfortably beat the Zacks Consensus Estimate by 3 cents. Omnicom’s earnings track record has been decent, with the company beating estimates in three out of the four trailing quarters posting an average beat of 2.0%. Let's see how things are shaping up for the upcoming second-quarter results.
Key Factors in the Second Quarter
Omnicom is concentrating on strengthening its business and expanding its client base globally through acquisition of complementary companies. These accretive acquisitions have enabled the company to build a diversified presence across the world.
During the quarter, Omnicom acquired Rabin Martin, a global health strategy consulting firm. Rabin Martin’s high-profile client base will augment Omnicom Public Relation’s already-strong healthcare offerings. By merging the expertise of both the companies, Omnicom is likely to set itself apart from its peers and leverage the burgeoning healthcare market to drive top-line growth.
During the second quarter of 2016, Omnicom acquired BioPharm Communications, a leading communications agency that serves 17 out of 25 major pharmaceutical companies across the globe. The acquisition will enable Omnicom to expand its leadership position in a highly competitive data-driven healthcare market.
Although the acquisitions are not likely to make any significant contribution in the soon-to-be-reported quarter, their impact on attracting potential revenue contribution from other clients is irrefutable. As the second biggest global advertising and marketing service agency group, Omnicom has an extensive geographic footprint, high client retention, along with a huge and diverse customer base. Despite a challenging macroeconomic environment, Omnicom is expected to grow at a moderate pace in 2016 and the ensuing quarter is not likely to be an exception.
Omnicom is experiencing a healthy performance in the developed markets like the U.S. and developing markets like Asia. The stringent cost-reduction initiatives have helped to boost earnings. The company is expanding its global footprint and is moving into new service areas. It is also building upon its digital and analytical capabilities by investing in agencies and partnering with innovative technology companies in key markets to lower its dependence on any single product.
However, a significant portion of Omnicom’s revenues comes from Europe. Presently, when the economy of the region is highly unpredictable after the Brexit referendum, it becomes difficult for the company to increase revenues and reduce costs. In addition, the company is susceptible to market risks of losing contracts related to media purchases and production costs, thereby affecting its bottom line and undermining its organic growth to some extent.
Our proven model does not conclusively show that Omnicom is likely to beat earnings this quarter as it lacks the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below:
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00%.
Zacks Rank: Omnicom’s Zacks Rank #3 when combined with 0.00% ESP makes an earnings beat unlikely this quarter. Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Vale S.A. (VALE - Free Report) , earnings ESP of +70.00% and a Zacks Rank #1.
Barrick Gold Corporation , earnings ESP of +14.29% and a Zacks Rank #3.
Carter's, Inc. (CRI - Free Report) , earnings ESP of +4.62% and a Zacks Rank #1.
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 >>
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Can Omnicom (OMC) Beat Q2 Earnings on Inorganic Growth?
Global marketing and corporate communications company Omnicom Group Inc. (OMC - Free Report) is scheduled to report second-quarter 2016 results before the opening bell on Jul 14. In the last reported quarter, earnings comfortably beat the Zacks Consensus Estimate by 3 cents. Omnicom’s earnings track record has been decent, with the company beating estimates in three out of the four trailing quarters posting an average beat of 2.0%. Let's see how things are shaping up for the upcoming second-quarter results.
Key Factors in the Second Quarter
Omnicom is concentrating on strengthening its business and expanding its client base globally through acquisition of complementary companies. These accretive acquisitions have enabled the company to build a diversified presence across the world.
During the quarter, Omnicom acquired Rabin Martin, a global health strategy consulting firm. Rabin Martin’s high-profile client base will augment Omnicom Public Relation’s already-strong healthcare offerings. By merging the expertise of both the companies, Omnicom is likely to set itself apart from its peers and leverage the burgeoning healthcare market to drive top-line growth.
During the second quarter of 2016, Omnicom acquired BioPharm Communications, a leading communications agency that serves 17 out of 25 major pharmaceutical companies across the globe. The acquisition will enable Omnicom to expand its leadership position in a highly competitive data-driven healthcare market.
Although the acquisitions are not likely to make any significant contribution in the soon-to-be-reported quarter, their impact on attracting potential revenue contribution from other clients is irrefutable. As the second biggest global advertising and marketing service agency group, Omnicom has an extensive geographic footprint, high client retention, along with a huge and diverse customer base. Despite a challenging macroeconomic environment, Omnicom is expected to grow at a moderate pace in 2016 and the ensuing quarter is not likely to be an exception.
Omnicom is experiencing a healthy performance in the developed markets like the U.S. and developing markets like Asia. The stringent cost-reduction initiatives have helped to boost earnings. The company is expanding its global footprint and is moving into new service areas. It is also building upon its digital and analytical capabilities by investing in agencies and partnering with innovative technology companies in key markets to lower its dependence on any single product.
However, a significant portion of Omnicom’s revenues comes from Europe. Presently, when the economy of the region is highly unpredictable after the Brexit referendum, it becomes difficult for the company to increase revenues and reduce costs. In addition, the company is susceptible to market risks of losing contracts related to media purchases and production costs, thereby affecting its bottom line and undermining its organic growth to some extent.
OMNICOM GRP Price and EPS Surprise
OMNICOM GRP Price and EPS Surprise | OMNICOM GRP Quote
Earnings Whispers
Our proven model does not conclusively show that Omnicom is likely to beat earnings this quarter as it lacks the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below:
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00%.
Zacks Rank: Omnicom’s Zacks Rank #3 when combined with 0.00% ESP makes an earnings beat unlikely this quarter. Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Vale S.A. (VALE - Free Report) , earnings ESP of +70.00% and a Zacks Rank #1.
Barrick Gold Corporation , earnings ESP of +14.29% and a Zacks Rank #3.
Carter's, Inc. (CRI - Free Report) , earnings ESP of +4.62% and a Zacks Rank #1.
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 >>