(OMC) Omnicom Group Reports Earnings Come in Flat

Omnicom Group Inc. (OMC) announced results for the first quarter of fiscal 2010. During the quarter, net income remained relatively flat at $163.4 million compared to $164.5 million in the year-ago quarter. EPS dipped by only 1 cent from 53 cents to 52 cents. Reported EPS surpassed the Zacks Consensus Estimate of 0.50 cents.

Worldwide revenue bloated 6.3% year over year to $2,920.0 million from $2,746.6 million in the first quarter of fiscal 2009. Domestic revenue reached $1,592.8 million, up 3.9% from $1,532.3 million during the same period in the previous year. International revenue rose 9.3% to $1,327.7 million from $1,214.3 million in the year-ago quarter.

Although, operating expense increased 6.7% year over year, but as a percentage of revenue it remained at 90%. Operating margin remained at 10%.

Omnicom Group is one of the largest providers of advertising, marketing and corporate communication services in the world. The company has acquired complementary companies to expand its clientele. Management remains committed to expand the business and relationships in Asia, where operating conditions remain extremely favorable. This should improve long-term profitability of the company.

To combat the current economic challenges, management has aligned the company’s cost structure by right-sizing headcount and reducing compensation pools.

However, the company reported decreases of 28.8% and 10.6% in net income and worldwide revenue sequentially. This is driven by the intense competitive advertising environment. Thus, we maintain our Neutral recommendation.

Zacks Investment Research

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