Omnicom Group Inc. OMC stock has had an impressive run on the bourse over the past year. Shares have gained 14.1%, outperforming the 10.2% rally of the industry it belongs to.
The company’s five-year earnings growth is pegged at 5%. Earnings for 2019 and 2020 are expected to grow 4.7% and 4.9%, respectively. Thus, Omnicom seems to be a stock that investors should retain in their portfolio for now.
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Factors Aiding the Stock
Omnicom remains focused on organic growth through service enhancement, hiring and retention of quality talent and improvement in operational efficiency. The company continues to make internal investments in its agencies across all of its practice areas, and pursue acquisitions in data analytics, digital transformation, precision marketing and healthcare areas.
The company’s bottom line is in good shape driven by ongoing efficiency initiatives in the areas of real estate portfolio management, back office services, procurement and IT services. Change in business mix resulting from disposal of some non-core or underperforming agencies over the past year, is also aiding the bottom line.
Omnicom has a consistent track record of returning value to shareholders. The company paid out $422.5 million through dividends and repurchased shares worth $545.2 million in the first nine months of 2019.
It paid out dividends of $548.5 million, $515.2 million and $505.4 million and repurchased shares amounting to $581.3 million, $568.4 million and $602.2 million, respectively in 2018, 2017 and 2016.
Last Words
Despite riding on significant growth prospects, Omnicom is not free from headwinds. Negative foreign exchange rate impact and weak acquisition revenues, net of disposition revenues have been weighing on the company’s top line for the past few quarters. Nevertheless, we believe that internal investments and operational efficiency efforts bode well for Omnicom in the long run.
Zacks Rank & Stocks to Consider
Omnicom currently carries a Zacks Rank #3 (Hold).
A few better-ranked stocks in the broader Zacks Business Services sector are Cardtronics CATM, Global Payments GPN and Mastercard Inc. MA. While Cardtronics sports a Zacks Rank #1 (Strong Buy), Global Payments and Mastercard carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term expected EPS (three to five years) growth rate for Cardtronics, Global Payments and Mastercard is 4%, 18% and 16%, respectively.
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