The media services unit of Omnicom Group Inc. (OMC), Omnicom Media Group, incorporated a new company with $2.0 billion named “Annalect Group” to align and leverage consumer and media data efficiently and to catch up on additional clients.
Omnicom has improved coordination between the diverse advertising and marketing strategies of its global customers, which should augment cross-selling opportunities across its businesses.
Typically, Omnicom’s strategy revolves around acquiring complementary companies with strong entrepreneurial management teams to expand its client base. During fiscal 2009, Omnicom acquired 4 subsidiaries and increased its stake in various existing ones. The increased integration process would enhance its client base, which is its key growth strategy as Omnicom’s business revolves around its clients. Current improving economic conditions should also benefit Omnicom as they help increase client spending.
Omnicom posted strong results during the third quarter of fiscal 2010 with an EPS of 57 cents, which met the Zacks Consensus Estimate.
However, this huge dependence on clients is risky as the loss of a client or reduction in client spending would adversely affect the company’s results. An intensely competitive advertising environment and pricing pressures remain causes of concern.
Omnicom’s direct competitors are Interpublic Group of Companies Inc. (IPG) and WPP plc (WPPGY). However, management remains committed to expand its business and relationships in Asia, where operating conditions remain extremely favorable. This should improve the long-term profitability of the company.
Markets are picking up and the improving economic conditions should benefit Omnicom as they help to increase consumer spending. We continue to rate the stock as Neutral in the long term. The stock’s short-term rating also remains “Hold” with a Zacks #3 Rank.
OMNICOM GRP (OMC): Free Stock Analysis Report
Zacks Investment Research
