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Why is Omnicom (OMC) Down 3.5% Since its Last Earnings Report?
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It has been about a month since the last earnings report for Omnicom Group Inc. (OMC - Free Report) . Shares have lost about 3.5% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is OMC due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Omnicom Q2 Earnings Surpass Estimates, Revenues Lag
Omnicom reported mixed second-quarter 2018 results wherein the company’s bottom line surpassed the Zacks Consensus Estimate but the top line missed the same.
Earnings of $1.60 per share beat the consensus mark by 6 cents and increased 14.3% year over year.
Total second-quarter 2018 revenues of $3,859.6 million missed the Zacks Consensus Estimate of $3,893.2 million. The figure was up 1.8% year over year. The year-over-year increase was backed by favorable foreign exchange rate impact of 2.1% and organic growth of 2%. These were, however, partially offset by a decrease in acquisition revenues, net of dispositions of 1%. Moreover, adoption of ASC 606 resulted in a 1.3% decrease in revenues.
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 in the reported quarter. The company enjoyed a lower income tax rate of 25.8% in the reported quarter compared with 32% in the year-ago quarter.
Revenues by Segment
Advertising segment revenues of $2,067.6 million increased 2% year over year. The segment accounted for 53.6% of total revenues in the reported quarter.
CRM Consumer Experience revenues increased 0.8% year over year to $660 million. The segment contributed 17.1% to total revenues.
CRM Execution & Support revenues decreased 3.6% year over year to $498.7 million. It accounted for 12.9% of total revenues.
PR (public relations) revenues of $362.7 million improved 3.5% on a year-over-year basis. It accounted for 9.4% of total revenues.
Healthcare revenues of $270.6 million were up 12.5% year over year. It contributed 7% of total revenues.
Revenues by Regions
Across regional markets, Asia Pacific recorded a 7.2% increase in revenues to $434.3 million, Euro & Other Europe improved 17.7% to $779.1 million and the U.K. recorded a 3.7% improvement to $363.5 million.
However, revenues from the Middle East and Africa were down 7% to $70.2 million. North America revenues reduced 3.6% year over year to $2,097.4 million. Latin America declined 5% year over year to $115.1 million.
Operating Results
Operating profit in second-quarter 2018 increased 1.9% year over year to $582.3 million. Operating margin of 15.1% was flat year over year. Operating expenses of $3,277.3 million were up 1.8% from the year-ago quarter.
Earnings before interest, taxes and amortization or EBITA for the reported quarter were $609.3 million, slightly up from $600 million in the year-ago quarter. EBITA margin remained constant with the year-ago quarter figure of 15.8%.
Balance Sheet & Cash Flow
In the first half of 2018, Omnicom generated free cash flow of $858.9 million compared with $797.5 million in the prior-year period. The company had a total debt of $4,888 million at the end of the reported quarter with cash, cash equivalents and short-term investments of $1,919 million compared with a respective $4,949 million and $1,874 million in 2017.
For the twelve months ended Jun 30, return on invested capital (ROIC) and return on equity (ROE) aggregated 20.2% and 50.1%, respectively. During the period from 2008 through Jun 30, Omnicom distributed 106% of net income to shareholders through dividends and share repurchases.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter.
At this time, OMC has a nice Growth Score of B, a grade with the same score on the momentum front. The stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for value investors than those looking for growth and momentum.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise OMC has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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Why is Omnicom (OMC) Down 3.5% Since its Last Earnings Report?
It has been about a month since the last earnings report for Omnicom Group Inc. (OMC - Free Report) . Shares have lost about 3.5% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is OMC due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Omnicom Q2 Earnings Surpass Estimates, Revenues Lag
Omnicom reported mixed second-quarter 2018 results wherein the company’s bottom line surpassed the Zacks Consensus Estimate but the top line missed the same.
Earnings of $1.60 per share beat the consensus mark by 6 cents and increased 14.3% year over year.
Total second-quarter 2018 revenues of $3,859.6 million missed the Zacks Consensus Estimate of $3,893.2 million. The figure was up 1.8% year over year. The year-over-year increase was backed by favorable foreign exchange rate impact of 2.1% and organic growth of 2%. These were, however, partially offset by a decrease in acquisition revenues, net of dispositions of 1%. Moreover, adoption of ASC 606 resulted in a 1.3% decrease in revenues.
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 in the reported quarter. The company enjoyed a lower income tax rate of 25.8% in the reported quarter compared with 32% in the year-ago quarter.
Revenues by Segment
Advertising segment revenues of $2,067.6 million increased 2% year over year. The segment accounted for 53.6% of total revenues in the reported quarter.
CRM Consumer Experience revenues increased 0.8% year over year to $660 million. The segment contributed 17.1% to total revenues.
CRM Execution & Support revenues decreased 3.6% year over year to $498.7 million. It accounted for 12.9% of total revenues.
PR (public relations) revenues of $362.7 million improved 3.5% on a year-over-year basis. It accounted for 9.4% of total revenues.
Healthcare revenues of $270.6 million were up 12.5% year over year. It contributed 7% of total revenues.
Revenues by Regions
Across regional markets, Asia Pacific recorded a 7.2% increase in revenues to $434.3 million, Euro & Other Europe improved 17.7% to $779.1 million and the U.K. recorded a 3.7% improvement to $363.5 million.
However, revenues from the Middle East and Africa were down 7% to $70.2 million. North America revenues reduced 3.6% year over year to $2,097.4 million. Latin America declined 5% year over year to $115.1 million.
Operating Results
Operating profit in second-quarter 2018 increased 1.9% year over year to $582.3 million. Operating margin of 15.1% was flat year over year. Operating expenses of $3,277.3 million were up 1.8% from the year-ago quarter.
Earnings before interest, taxes and amortization or EBITA for the reported quarter were $609.3 million, slightly up from $600 million in the year-ago quarter. EBITA margin remained constant with the year-ago quarter figure of 15.8%.
Balance Sheet & Cash Flow
In the first half of 2018, Omnicom generated free cash flow of $858.9 million compared with $797.5 million in the prior-year period. The company had a total debt of $4,888 million at the end of the reported quarter with cash, cash equivalents and short-term investments of $1,919 million compared with a respective $4,949 million and $1,874 million in 2017.
For the twelve months ended Jun 30, return on invested capital (ROIC) and return on equity (ROE) aggregated 20.2% and 50.1%, respectively. During the period from 2008 through Jun 30, Omnicom distributed 106% of net income to shareholders through dividends and share repurchases.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There have been two revisions lower for the current quarter.
Omnicom Group Inc. Price and Consensus
Omnicom Group Inc. Price and Consensus | Omnicom Group Inc. Quote
VGM Scores
At this time, OMC has a nice Growth Score of B, a grade with the same score on the momentum front. The stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.
Overall, the stock has an aggregate VGM score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for value investors than those looking for growth and momentum.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. It's no surprise OMC has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.