Omnicom Stock Falls 7% As Q2 Results Disappoint Wall Street

Wall Street was disappointed with Omnicom’s second quarter performance—results were announced today--driving the company’s stock price down 7% to $72.57 in early morning trading.

Omnicom reported a modest 1.8% gain in revenue for the quarter to $3.86 billion. Profits were up 10% to $364.2 million.

Organic revenue growth was up 2% globally but down nearly 1% percent in North America, by far its biggest market, and down 0.5% in the U.S. Reported North America revenue was down 3.6%.

Omnicom CEO John Wren on a conference call Tuesday morning attributed the lackluster performance in North America to client losses, reductions in the scope of work for some clients and declines in programmatic. Wren also noted recent big wins by BBDO (Dunkin’ Donuts), PHD (HSBC) and GSD&M (Pizza Hut).



CFO Phil Angelastro also cited “weakness” from certain of the company’s Canadian agencies.

In other regions, organic growth in the recently strong UK fell 2.2%, while Europe was up 11% and Asia Pacific was up 8.5%. Latin America was up 2.2%.

Overall, Wren said, he was “pleased” with Q2 performance and said the company remained on track to achieve growth of between 2% and 3% for the full year.

The holding company continues to evaluate its asset portfolio and expects further divestitures of some CRM businesses in the third quarter. It recently agreed to divest of Sellbytel, a provider of outsourced sales and support services, to Webhelp Group, a Paris-based global business process outsourcer that is backed by investor KKR. Terms were not disclosed, but on the Tuesday morning call executives said the deal is expected to close in the third quarter.

The holding company will continue to acquire firms as well with a focus on data and precision marketing assets. The firm also has ongoing cost reduction activities and operating efficiency programs, said Angelastro.

Wren noted the company’s new precision marketing platform Omni, which he said would be “a central part of the Group’s strategy.” Angelastro confirmed that the company considered a bid for Acxiom (recently acquired by Interpublic Group) but ultimately decided to “rent not buy” data from Experian and others to help operate its Omni platform. “Data is a commodity,” he said, adding that the firm believes the approach it has taken “enhances our position of neutrality.”

For the first half of the year, total revenue was up 1.5% to nearly $7.5 billion, while North America revenue fell more than 5% with organic growth of 0.5%.

Wren said he was “cautiously optimistic” that results in the second half of the year would be better than the first half.

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