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Why Is Omnicom (OMC) Up 4.2% Since Last Earnings Report?

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A month has gone by since the last earnings report for Omnicom (OMC - Free Report) . Shares have added about 4.2% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Omnicom due for a pullback? 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 drivers.

Omnicom Q2 Earnings and Revenues Beat Estimates

Omnicom  reported impressive second-quarter 2022 results, wherein the company’s earnings and revenues surpassed the Zacks Consensus Estimate.

Earnings of $1.68 per share beat the consensus mark by 7.7% and increased 15.1% year over year, driven by strong margin performance.

Total revenues of $3.6 billion surpassed the consensus estimate by 4.4% but declined slightly year over year. The decline in the top line resulted from a negative impact of 4.7% due to foreign currency translations, fall in acquisition revenues and net of disposition revenues of 6.7%, partially offset by an increase of 11.3% in revenues from organic growth.

Strong Organic Growth Across all Disciplines and Regions

Across fundamental disciplines, revenues from Advertising & Media were up 8.2%, Precision marketing revenues jumped 21%, Execution & Support revenues increased 9.3%, Commerce and Brand Consulting revenues were up 11.2%, Experiential revenues improved 36.6%, Public Relations revenues augmented 15.8%, and Healthcare revenues increased 9.2%, organically, year over year.

Across regional markets, year-over-year organic revenue growth was 10.7% in the United States, 12% in the United Kingdom, 12.5% in the Other North America, 15.1% in the Euro Markets & Other Europe, 14% in Latin America, and 28.3% in the Middle East and Africa. Asia Pacific was up 4.7% year over year.

Margins Declined Year Over Year

Adjusted EBITA in the quarter came in at $562.4 million, down 4.6% year over year. Adjusted EBITA margin was 15.8%, down 70 basis points year over year. Operating profit of $541.6 million declined 4.7% year over year. Operating margin declined 70 basis points to 15.2%.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

VGM Scores

Currently, Omnicom has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Omnicom has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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