Company Reports

Omnicom posted a solid start to 2024 as first-quarter revenue and profitability met our expectations. The integration of Flywheel has bolstered the precision marketing offering. We appreciate Omnicom’s efforts to extend its service offerings, with the acquisition of Flywheel providing clients with support through e-commerce purchasing. We are maintaining our $108 fair value estimate and narrow moat rating and view the shares as modestly undervalued.

Omnicom is one of the five largest advertising agency holding companies globally. With well-recognized creative agencies and subholding companies such as BBDO and DDB, we expect the firm to maintain its market position, likely making more acquisitions to increase its focus on faster-growing emerging markets and the digital ad business.

Omnicom is the second-largest player (based on revenue) within the advertising industry. Compared with peers, the firm has attained that position less through acquisitions and more through organic growth. With well-recognized creative agencies and sub-holding companies such as BBDO and DDB, we expect Omnicom to maintain its market position, likely making more acquisitions to increase its focus on faster-growing emerging markets and the digital ad business.

Narrow-moat Omnicom generated impressive organic growth, provided strong guidance for 2024, driven mainly by account wins, and completed the commendable strategic acquisition of Flywheel, which we believe positions the firm well to benefit from the growing retail media market. We slightly increased our growth projections, resulting in our Omnicom fair value estimate increasing to $108 from $98. With a sizable margin of safety, we view the shares as attractive.

Omnicom is the second-largest player (based on revenue) within the advertising industry. Compared with peers, the firm has attained that position less through acquisitions and more through organic growth. With well-recognized creative agencies and sub-holding companies such as BBDO and DDB, we expect Omnicom to maintain its market position, likely making more acquisitions to increase its focus on faster-growing emerging markets and the digital ad business.

Narrow-moat Omnicom’s third-quarter results demonstrate the firm’s continuing success in interagency collaboration across agency brands, which has made Omnicom a one-stop-shop ad-holding firm and helped it win a few notable accounts. We think the account wins, along with successfully retaining many current accounts and the ad spending growth that we foresee next year will result in Omnicom exceeding our initial 2024 revenue increase projection. We adjusted our model accordingly, resulting in a $98 fair value estimate, up from $95. We view the shares, which are trading at a 21% discount to our fair value estimate, as attractive. Overall, the third-quarter results of Omnicom and Publicis (which reported last week) support our assumption that the advertising space still has room for growth this year and in 2024.

Omnicom is the second-largest player (based on revenue) within the advertising industry. Compared with peers, the firm has attained that position less through acquisitions and more through organic growth. With well-recognized creative agencies and sub-holding companies such as BBDO and DDB, we expect Omnicom to maintain its market position, likely making more acquisitions to increase its focus on faster-growing emerging markets and the digital ad business.

We are maintaining our $95 fair value estimate of narrow-moat Omnicom. The firm’s second-quarter results indicate the strengthening of ad spending, which is consistent with our expectations. In addition, we commend Omnicom for aggressively investing in artificial intelligence and partnering with hyperscalers that we think are at the forefront of continuing progression in AI. We did not make significant adjustments to our projections as management slightly increased the low end of its full-year organic growth outlook while maintaining its margin guidance. In our opinion, Omnicom is fairly valued. We view narrow-moat peer WPP, which at current levels has a dividend yield above 4%, as a more attractive investment.

While uncertainties still surround the state of the economy and monetary policies, Omnicom continues to execute well on all fronts, as displayed by its first-quarter results with solid organic growth. Its clients appear to stand by their ad spending commitments for this year while still demanding flexibility, which may also be the case for the clients of Omnicom’s peers IPG, Publicis, and WPP. Omnicom is also piquing its clients’ interests by working closely with Microsoft and OpenAI’s artificial intelligence capabilities, which bodes well for the firm in the long run. We made only slight adjustments to our projections and are maintaining our $95 fair value estimate, which indicates that the narrow-moat Omnicom is currently fairly valued.

Omnicom is the second-largest player (based on revenue) within the advertising industry. Compared with peers, the firm has attained that position less through acquisitions and more through organic growth. With well-recognized creative agencies and sub-holding companies such as BBDO and DDB, we expect Omnicom to maintain its market position, likely making more acquisitions to increase its focus on faster-growing emerging markets and the digital ad business.

Omnicom reported solid fourth-quarter revenue growth that also drove margin expansion. While various digital ad platforms like Google, Meta, Snap, and Pinterest, and data collaboration service providers like LiveRamp have indicated weakening demand, the likes of Omnicom and Publicis have reported good results and provided guidance that demonstrates strong demand from advertisers for digital transformation offerings along with media buying and creativity. We believe data privacy and ad measurability challenges have pushed more advertisers to seek assistance and guidance from the ad holding companies.

Omnicom easily beat third-quarter FactSet consensus estimates on the top and bottom lines, driven by organic growth in all its offerings, led by its clients’ strong demand for digital transformation and data analytics services. Like its peers such as Publicis, WWP, and IPG, Omnicom’s improved mix of offerings continues to provide some protection from the macro uncertainties while benefiting from changes and growth opportunities within the ad space. Given the strong third-quarter results, Omnicom increased its revenue growth guidance. We made minor adjustments to our projections, which did not affect our $90 fair value estimate. We continue to view this narrow-moat stock with a 4% dividend yield as attractive.

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.

Omnicom reported strong first-quarter results, as demand for all of Omnicom’s services remained elevated despite increasing economic uncertainty related to Ukraine and higher inflation, which could impact advertisers’ willingness to spend. With that in mind, management still increased its full-year organic growth guidance with the assumption that the first-quarter performance will more than offset any weakness later in the year. We are not making significant adjustments to our model and are maintaining our $90 fair value estimate of narrow moat rated Omnicom.

Omnicom is the second-largest player (based on revenue) within the advertising industry. Compared with peers, the firm has attained that position less through acquisitions and more through organic growth. With very well-recognized creative agencies and subholding companies such as BBDO and DDB, we expect Omnicom to maintain its market position, likely making more acquisitions and increase its focus on faster-growing emerging markets and the digital ad business.

Omnicom reported solid fourth-quarter results with both top- and bottom-line growth exceeding our expectations. Strength was broad across all of Omnicom’s businesses, with Advertising and Precision Marketing leading the way with 7.4% and 19.6% year-over-year increases, respectively. Revenue was offset slightly due to the sale of ICON in June, a specialty media business, as well as pressure from currency rates. We believe Omnicom will continue to benefit from increased in-person opportunities coming out of the pandemic and as well-known brands return to the forefront. After including fourth-quarter results into our model, we are maintaining our fair value estimate of $90. With shares increasing 5% after hours, Omnicom is approaching 3-star territory.

Omnicom is the second-largest player (based on annual revenue) within the advertising space. Compared with its peers, the firm has attained that position less through acquisitions and more through organic growth. With very well-recognized creative agencies and subholding companies such as BBDO and DDB, we expect Omnicom to maintain its market position as it generates competitive organic growth, continues to make acquisitions, and increases focus on the faster-growing emerging markets and the overall digital ad markets.

Omnicom reported mixed third-quarter results as revenue slightly missed the FactSet consensus estimates while the firm beat bottom-line expectations. With strong double-digit organic revenue growth, the revenue miss was mainly due to Omnicom’s disposition of ICON in June. The firm saw strong demand for all of its services including media, creativity, digital marketing, and digital and brand consulting. In our view, the macro environment remains accommodative for Omnicom and its peers within the overall advertising space, as the well-known agency brands have come to the forefront again. After including third-quarter results in our model, we have increased our fair value estimate to $90 per share from $89. We continue to view narrow-moat- and 4-star-rated Omnicom as an attractive investment, especially with a 3%-plus dividend yield at current price levels.

We are increasing our fair value estimate of Omnicom to $89 from $85 as the firm reported strong second-quarter results with the top- and bottom-lines coming in higher than FactSet consensus estimates due to the recovery from the pandemic, which was accompanied by better-than-expected return to ad spending. Revenue growth was driven by a strong rebound in demand for all services provided by the firm in all regions. In addition, management remained confident that growth will continue throughout 2021, although decelerating in the second half. The firm also expects some margin improvement for the year. While Omnicom posted solid results, reports stating that the NFL will take some of its media ad-spending in-house pushed the stock down 4%. If true, we do not expect such a move by the NFL to significantly impact Omnicom’s revenue, nor do we see the risk that other advertisers will follow and bring things in-house increasing.

Omnicom is the second-largest player (based on annual revenue) within the advertising space. Compared with its peers, the firm has attained that position less through acquisitions and more through organic growth. With very well-recognized creative agencies and subholding companies such as BBDO and DDB, we expect Omnicom to maintain its market position as it generates competitive organic growth, continues to make acquisitions, and increases focus on the faster-growing emerging markets and the overall digital ad markets.