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Omnicom Q3 Reported Earnings Flat, Revs Rise

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OmnicomGroup Inc. (OMC - Free Report) reported third-quarter 2013 net income of $196.0 million compared with $203.9 million in the year-earlier quarter. However, earnings per share (EPS) were flat year-over-year at 74 cents and below the Zacks Consensus Estimate of 80 cents per share.

The reported earnings were affected by $28.1 million pre-tax charges pursuant to Omnicom's proposed merger with Publicis Groupe, S.A.

Excluding the merger-related expenses, non-GAAP net income for the reported quarter rose 6.8% to $217.7 million or 82 cents per share, compared with $203.9 million or 74 cents per share in the year-ago quarter.


Quarterly revenues climbed 2.5% to $3,490.5 million and exceeded the Zacks Consensus Estimate of $3,478 million. From a geographical perspective, domestic revenues accounted for 52% of the total revenue and rose 3.2% to $1,815.5 million. International revenues (constituting the remaining 48% of the total revenue) increased 1.6% year over year to $1,675.0 million.

The increase in revenues was primarily driven by 4.1% rise in organic growth, partly offset by a 1% decline in inorganic growth and a 0.6% decrease due to foreign currency translation effects.

Excluding the impact of merger-related expenses, non-GAAP EBITA (earnings before interest, taxes and amortization) for the reported quarter improved 4.5% year over year to $433.3 million, while non-GAAP operating income rose 5.2% to $407.5 million.

Revenues by Segment                  

By segment, organic revenue for Advertising was up 4.8% to $1,644.4 million; CRM (customer relationship management) organic revenues increased 2.3% year over year to $1,270.3 million; PR (public relations) organic revenues of $332.5 million were up 4.6% year over year; and Specialty organic revenues of $243.3 million increased 8.3% year over year.

Balance Sheet & Cash Flow

Omnicom generated free cash flow of $1,014.1 million for nine months ended Sep 30, 2013, up from $966.0 million for the same period in the previous year. The company had a total debt of $4,054 million at quarter-end, compared with $4,462 million in the year-ago period. Cash and short-term investments aggregated $1,534 million at quarter-end, compared with $1,973 million in the prior year.

During the reported quarter the company paid a quarterly dividend of 40 cents per share. Omnicom also has a share buyback program in place, under which it repurchased shares worth $492.3 million during nine months ended Sep 30, 2013. However, the company did not repurchase any shares in the reported quarter.

Omnicom has a track record of winning new clients and receiving additional deals from the existing ones. The company’s business mix is well diversified geographically and benefits largely from growing markets. In addition, the company’s efforts to maintain its strong global reputation are commendable.

Omnicom currently carries a Zacks Rank #4 (Sell). Some better-placed stocks in the same industry worth considering include Clear Channel Outdoor Holdings Inc. (CCO - Free Report) , WPP plc and Huron Consulting Group Inc. (HURN - Free Report) . While Clear Channel and WPP both carry a Zacks Rank #2 (Buy), Huron Consulting carries a Zacks Rank #1 (Strong Buy).

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