Omnicom growth falls short as U.S. base shrinks

By Sonam Rai (Reuters) - Omnicom Group Inc fell short of expectations for revenue growth in the second quarter as U.S. clients put their marketing dollars elsewhere, sending shares of the New York firm and rival global advertising agencies lower. Madison Avenue-based Omnicom reported a 2 percent rise in organic revenue - a closely watched measure that excludes foreign exchange rate changes and mergers

Reuters July 18, 2018 00:05:32 IST
Omnicom growth falls short as U.S. base shrinks

Omnicom growth falls short as US base shrinks

By Sonam Rai

(Reuters) - Omnicom Group Inc fell short of expectations for revenue growth in the second quarter as U.S. clients put their marketing dollars elsewhere, sending shares of the New York firm and rival global advertising agencies lower.

Madison Avenue-based Omnicom reported a 2 percent rise in organic revenue - a closely watched measure that excludes foreign exchange rate changes and mergers. Analysts, on average, had expected a 2.3 percent rise, according to research firm FactSet.

Shares in the company fell almost 8 percent after opening, while those in rivals Publicis, IPG and London-based WPP PLC dipped by 3-4 percent on their respective stock markets.

The "Big Four" traditional ad companies have been facing competition from consulting firms such as Accenture, IBM and Deloitte, which have built big marketing businesses in recent years through acquisitions.

There has also been a shift in media consumption patterns as consumers move from traditional to digital media.

Omnicom again showed signs of offsetting an almost 1 percent drop in organic revenue in North America with gains in Europe, where the measure grew 11.2 percent compared to a year earlier.

In 2017, North America contributed nearly 57 percent to Omnicom's revenue, while Europe contributed 27 percent.

"We expect the continued underperformance of North America to be a bugbear for investors," RBC Capital Markets analyst Steven Cahall wrote in a client note.

"OMC will struggle to shrug off a domestic organic miss even if the growth is made up elsewhere."

Chief Executive Officer John Wren told a call with analysts he expected the weakness in North America to subside "partially" in the second half of 2018 while adding a strong dollar would hurt revenue by 1 percent in the third and fourth quarters.

"(In North America) we faced declines from several advertising and media client losses that occurred in the prior periods and reductions in scope," Wren said.

"In addition, certain clients continued to change the way they are purchasing media in the programmatic business, although this trend is slowing."

Omnicom last week rolled out its data driven marketing and insights platform - Omni, aiming to battle the rise of internet giants Google and Facebook, which have transformed the sector by using data to better target advertising.

The company, whose clients include Apple, McDonald's Corp and Adidas, said net income attributable to the company rose to $364.2 million, or $1.60 per share, in the second quarter ended June 30, from $328.6 million, or $1.40 per share.

Excluding one-time items, Omnicom earned $1.60 per share, edging past analysts' expectations of $1.54 per share, according to Thomson Reuters I/B/E/S. Profit was helped by growth in Europe and lower U.S. taxes.

Revenue rose 1.8 percent to $3.86 billion, missing analysts' expectations of $3.89 billion.

(Reporting by Sonam Rai in Bengaluru; Editing by Shailesh Kuber)

This story has not been edited by Firstpost staff and is generated by auto-feed.

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