Omnicom Stock Down Following Report of Fourth-Quarter Revenue Decline

Holding company still optimistic thanks to organic growth

The news follows a disappointing report from Publicis Groupe.
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Omnicom reported a decline in fourth-quarter revenue compared with 2017 in an earnings report today.

The holding company’s worldwide revenue decreased 2.2 percent to $4.09 billion. Its stock value fell from a close of $73.87 to a low of $72.52 before rebounding to $73.34 at the time of this story for a decrease of approximately 0.72 percent.

This trend is in keeping with last week’s report that Publicis Groupe had missed earnings expectations. Forrester principal analyst Jay Pattisall said the  decline in stock price was likely due to the decrease in fourth-quarter revenue.

“But marketers and investors should bear in mind that Omnicom had a strong Q4 new business run of $1.1 billion, thanks in part to the precision marketing capabilities of Omnicom’s targeting and insights platform, Omni,” Pattisall told Adweek. “Given marketers’ interest in performance and personalization, 2019 could see a continuation of Q4 new business performance.”

Omnicom attributed the revenue decrease to the negative foreign exchange rate impact of 2 percent, net of disposition revenue of 2.4 percent and a decrease in acquisition revenue, as well as the adoption of new accounting standards at the start of 2018.

That shift was offset by organic growth increase of 3.2 percent compared with the fourth quarter of 2017. Advertising organic growth increased 4.4 percent, CRM consumer experience increased 4.2 percent, PR increased 1.5 percent and healthcare increased 7.6 percent, while CRM execution and support decreased 3.7 percent. Omnicom also reported fourth-quarter organic growth increases compared with 2017 across all regions: 2.6 percent in the U.S., 1.3 percent for the rest of North America, 2.4 percent in the U.K., 5.7 percent for Europe, 2.9 percent for Asia Pacific, 1 percent for Latin America and 4.2 percent for the Middle East and Africa.

On the earnings call, chairman and CEO John Wren called 2018 a year of “significant growth” for his company and said Omnicom had achieved its internal growth goals, adding that “strategic steps” such as a continued investment in technology and analytical capabilities contributed to growth.

For 2018, Omnicom reported a marginal revenue increase of 0.1 percent over 2017. Its organic revenue increased 2.6 percent compared with the same period in 2017, including 2.9 percent from advertising, 1.8 percent from PR, 4.5 percent from healthcare and 5.9 percent from consumer experience, while reporting a 2.7 percent decrease from CRM execution and support. Organic growth was strongest in Europe (8.2 percent), Asia Pacific (7.9 percent) and Latin America (2 percent), while the U.S. and U.K. saw growth of 0.7 percent. Organic revenue decreased in North America outside of the U.S. by 3.9 percent and 2.9 percent in the Middle East and Africa.

Wren said he saw reason to be optimistic about 2019 in the wake of new business wins including the U.S. Army’s decision to award its 10-year, $4 billion contract to Team DDB in November and OMD’s October victory in the global Daimler AG media review. Wren said Omnicom’s new business wins in Q4 totaled $1.1 billion and seemed confident that the holding company’s investments in tech, data and analytics put it in a position to add to that total this year.

Wren also took time to highlight Omnicom’s progress with diversity in executive leadership, saying, “I’m glad to say we have one of the most diverse boards in North America.”

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