Merrill Lynch Gives Buy Rating To Omnicom

Following a conference call with investors yesterday, Merrill Lynch reiterated its "Buy" rating for marketing and communications-services holding company Omnicom, stating that it believes the company is "still on track to deliver organic revenue growth of 7 percent in 2006 ... comfortably ahead of its largest peer's."

The recommendation comes despite news of Omnicom network DDB's recent loss of the $430 million J.C. Penney account to Saatchi & Saatchi, noting that GSD&M continues to chase the consolidated Wal-Mart account, worth nearly $600 million annually. The holding company has a good track record for new business, with 10 percent to 12 percent of the prior year's new business wins in billings translating into 60 percent to 70 percent of the organic revenue growth in the current year. Merrill Lynch also notes that Omnicom companies' online revenue of $700 million to $1 billion of its revenues (10 percent to 12 percent of the total) is above the Internet's share of total ad spending in the U.S., at 5 percent to 6 percent. That leaves the company "well-positioned with respect to the Internet." Omnicom's stock closed Monday at $91.92, down 40 cents.

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