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Omnicom (OMC) to Report Q2 Earnings: What's in the Cards?

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Global marketing and corporate communications firm Omnicom Group Inc. (OMC - Free Report) is scheduled to report second-quarter 2017 results before the opening bell on Jul 20. In the last reported quarter, earnings beat the Zacks Consensus Estimate by a penny. Omnicom’s earnings track record has been quite healthy, having beaten estimates in each of the trailing four quarters with an average beat of 1.71%.

Let's see how things are shaping up for the upcoming quarterly results.

Key Factors

Omnicom remains poised on its strategy of making internal investments and accretive acquisitions to further strengthen its core capabilities.The company maintains a balanced growth model through a combination of well-focused internal development initiatives and strategic acquisitions. The companyexpects to witness higher revenues in the to-be-reported quarter on the back of prudent acquisitions and organic growth.

In addition, Omnicom is witnessing a healthy performance in developed markets like the U.S. and developing markets like Asia. The measures undertaken by the company to reduce costs helped it boost earnings. It is expanding its global footprint and is moving into new service areas. The company is also building upon its digital and analytical capabilities by investing in agencies and partnering with innovative technology firms in key markets. Omnicom’s operations are diversified across technology platforms, thus lowering its dependence on any one product in these dynamic technological markets.

However, a significant portion of Omnicom’s revenues comes from Europe. In the present scenario, when the economy in the region is highly unpredictable particularly after the Brexit referendum, it becomes difficult for the company to increase revenues and reduce costs. Brexit could further result in higher tariff and non-tariff barriers to trade between the U.K. and the European Union, lowering the productivity of the company. In addition, the company is susceptible to market risks of losing contracts related to media purchases and production costs. This is likely to affect the bottom line and undermine its organic growth to some extent.

Furthermore, a significant portion of the revenues is derived in various currencies other than the U.S. dollar. This is likely to adversely impact the company’s financial results due to volatility in currency exchange rates. As Omnicom expands its international operations, it exposes itself to risks from foreign exchange barriers and uncertainty from monetary devaluation. The company also faces huge concentration risks as it relies on a few big clients for its businesses. These developments might prove to be a strain on Omnicom in the impending quarter.  

For the to-be-reported-quarter, Omnicom’s revenues are anticipated to be affected by the volatility in the market. In addition, client spending patterns in the global markets are likely to be constrained by a challenging macroeconomic environment and geopolitical scenario.

Earnings Whispers

Our proven model does not conclusively show that Omnicom is likely to beat earnings this quarter as it does not possess 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  -0.72%. This is because the Most Accurate estimate is $1.38 while the consensus estimate is pegged higher at $1.39. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Omnicom Group Inc. Price and EPS Surprise


Omnicom Group Inc. Price and EPS Surprise | Omnicom Group Inc. Quote

Zacks Rank: Omnicom has a Zacks Rank #3. While this increases the predictive power of ESP, we need to have a positive ESP to be confident about an earnings surprise.

Note that we caution against stocks with a Zacks Rank #4 or #5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

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:

DISH Network Corporation (DISH - Free Report) has an Earnings ESP of +17.33% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Dover Corporation (DOV - Free Report) has an Earnings ESP of +5% and a Zacks Rank #2.

Banc of California, Inc. (BANC - Free Report) has an Earnings ESP of +8.33% and a Zacks Rank #3.

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