Omnicom’s Q2 2022 Results Indicate Healthy Ad Spending; Maintaining $90 FVE; Shares Undervalued

Omnicom reported better-than-expected second-quarter 2022 top-line and bottom-line results relative to FactSet consensus, indicating a less significant reduction in ad spending by clients than expected, although macroeconomic uncertainty remains. According to management, while Omnicom’s clients remain cautious, they are also hesitant to drastically cut marketing spending too early, as such a move could come at the cost of losing revenue during the initial phase of possibly an earlier economic recovery. With the second-quarter year-over-year double-digit organic growth and margin expansion, Omnicom increased its full-year organic growth guidance. However, it still implies deceleration during the second half due to high comps and uncertainty about the economy. We did not make any material changes to our model and are maintaining our $90 fair value estimate. We continue to view this narrow-moat name—which at current levels has a 4%-plus dividend yield—as attractive.