Omnicom Earnings: Advertising Is Strengthening, AI May Accelerate Weak Consulting Growth

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.