Omnicom Group Inc. (OMC) reported fourth-quarter 2014 net income of $329.5 million or $1.30 per share versus $300.5 million or $1.13 in the year-ago quarter. Reported earnings per share beat the Zacks Consensus Estimate by four cents. The robust results were driven by healthy organic growth.
For full year 2014, Omnicom’s earnings increased to $1,104.0 million or $4.24 per share from $991.1 million or $3.71 per share in 2013. The reported earnings for 2014 exceeded the Zacks Consensus Estimate by 3 cents.
Revenues
Quarterly revenues improved 3.4% year over year to $4,195.1 million, exceeding the Zacks Consensus Estimate of $4,143 million. From a geographical perspective, domestic revenues improved 8.8% over the prior-year period to $2,239.1 million. International revenues decreased 2.2% year over year to $1,956.0 million.
Higher revenues for the reported quarter were primarily driven by a 5.9% rise in organic growth. Acquisitions, net of dispositions led to a 0.6% increase in revenues, while foreign exchange rates led to a 3.1% decrease in revenues on a year-over-year basis.
For full-year 2014, Omnicom’s revenue increased 5.0% to $15,317.8 million from $14,584.5 million in 2013.
Non GAAP earnings before interest, taxes and amortization (EBITA) for the reported quarter improved 5.9% year over year to $609.4 million.
Quarterly Performance
Segment-wise, organic revenues for Advertising were up 8.5% year over year to $2,102.1 million; CRM (customer relationship management) organic revenues increased 1.0% year over year to $1,418.6 million; PR (public relations) organic revenues of $368.1 million exhibited an 8.5% year-over-year rise; and Specialty organic revenues of $306.3 million increased 9.4% year over year.
Across regional markets, North America reported growth of 8.3% in organic revenues to $2,386.5 million. Asia Pacific recorded an increase of 3.2% ($436.6 million), while organic revenues for Europe and Africa Mid East increased 1.2% ($771.0 million) and 14.1% ($73.5 million), respectively. Organic revenues from the U.K. surged 6.2% to $401.1 million, while Latin America recorded a year-over-year decrease of 0.5% to $126.4 million.
Balance Sheet & Cash Flow
Omnicom generated free cash flow of $1,582.7 million for full-year 2014, versus $1,457.7 million in the prior-year period. The company had a total debt of $4,570 million as of Dec 31, 2014, compared with $4,040 million in the year-ago period. Cash and short-term investments aggregated $2,390 million at year-end 2014, compared with $2,729 million a year ago.
Omnicom has a share buyback program in place, under which it repurchased shares worth $994.1 million in 2014. Omnicom has consistently distributed more than 100% of net income to shareholders through dividends and share repurchases. Omnicom achieved a 34.3% return on equity (ROE) for the twelve months ended Dec 31, 2014.
Moving Forward
Omnicom has a track record of strengthening its business and expanding its global client base through acquisition of complementary companies. We remain encouraged with the strong quarterly results of the company as highlighted by its healthy top- and bottom-line beat.
Omnicom currently has a Zacks Rank #3 (Hold). Other stocks in the industry that look promising include Harte-Hanks Inc. (HHS), TubeMogul, Inc. (TUBE) and Clear Channel Outdoor Holdings Inc. (CCO), each carrying a Zacks Rank #2 (Buy).
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