We recently maintained a Neutral recommendation on Omnicom Group Inc. (OMC).
New York-based Omnicom is among the largest advertising, marketing and corporate communication companies in the world. Its services span across four disciplines including traditional media advertising, customer relationship management (CRM), public relations and specialty communications.
Omnicom continues to generate new business wins and acquire complementary companies to expand its client base, around which its business revolves. Also, management remains committed to expanding its businesses and relationships in Asia, where operating conditions are extremely favorable.
In the fourth quarter of fiscal 2010, the company completed eight acquisitions. Among these, Ketchum, a leading global public relations unit of Omnicom, acquired the majority stake in Maslov PR, the Moscow-based, full-service Russian public relations company along with its Greater China operations. Increasing stake will enable Ketchum to expand its range of services and meet the growing demands of China, the fastest growing economy of the world.
Gradual improvement in economic conditions will ultimately prove beneficial for the company as it will enhance the spending power of its clients. Moreover, with the proliferation of media channels, including the rapid development of interactive technologies, the industry has become even more competitive and dynamic. For targeting mass audiences in a cost-effective manner, the companies seek customized mix of advertising and marketing communications service.
Extreme dependence on clients, on the other hand, is also risky as it could adversely impact financial results at the loss of a client or reduction in client spending. In the fiscal year 2010, Omnicom generated approximately 50.6% of its total revenue from its 100 largest clients. Moreover, an intensely competitive advertising environment and pricing pressures are causes of constant worry.
The company faces stiff competition from its peers like Interpublic Group of Companies, Inc. (IPG) and WPP plc (WPPGY).
INTERPUBLIC GRP (IPG): Free Stock Analysis Report
OMNICOM GRP (OMC): Free Stock Analysis Report
WPP GRP PLC (WPPGY): Free Stock Analysis Report
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