Omnicom Group Inc. (OMC) posted decent operating results for the second quarter of 2012 on July 17. The company’s earnings per share of $1.02 exceeded the year-ago earnings by 5 cents and managed to surpass the Zacks Consensus Estimate of $1.01 by a cent.
Net income came in at $282.7 million, up 2.8% year over year.
Revenue
Total revenue was $3,561.0 million, up 2.1% year over year from $3,487.4 million in the corresponding quarter of the previous year. Results also surpassed the Zacks Consensus Estimate of $3,528 million.
From a geographical perspective, Domestic revenue accounted for 52% of total revenue and rose 5.4% to reach $1,859.6 million in the quarter while International revenue, representing the rest 48%, plummeted 1.3% to $1,701.4 million.
Based on disciplines, Advertising revenue (47.5% of total revenue) grew 3.4% to $1,690.7 million; CRM revenue (36.1%) increased 2.1% to $1,287.6 million; PR revenue (9.0%) was $322.2 million, up 9.0% year over year; and Specialty revenue (7.3%) was $260.5 million, down 5.7%.
Margins
Operating expenses, excluding amortization of intangibles, increased roughly 2% to $3,030.6 million and represented 85% of total revenue. Operating margins increased 22 basis points to 14.22% in the quarter. Omnicom’s net interest expense increased 26% to $34.9 million.
Cash Flow
Six months ended June 30, 2012, Omnicom had roughly $157.3 million cash flow from operating activities. During the period, the company spent roughly $153.5 million in dividends; $112.8 million on capital spending and $570.8 million on repurchasing shares.
Free cash flow for the period amounted to $664.1 million, up 20.6% year over year.
Balance Sheet
Omnicom had a total debt balance of $3,922 million and cash and short-term investments of $1,680 million in the twelve month period ending June 30, 2012. Return on equity for the period was 28.2%.
Omnicom has a strong track record of winning new clients and receiving additional deals from the existing ones. The company’s business mix is well-diversified geographically and benefits largely from the growing markets. In addition, the company’s efforts in maintaining controlled expenses and strong global reputation are commendable.
We currently maintain a neutral recommendation on Omnicom. The stock also bears a Zacks #3 Rank (Hold).
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