Omnicom Group (OMC) is a holding company for many of the leading global advertising, marketing and corporate communications agencies in the world, notes Hilary Kramer, editor of Value Authority.

The company operates in all major markets, and it has large and diverse client base. In fact, OMC’s 100 largest clients are primarily large international companies that accounted for approximately 54% of revenue in 2021. OMC has more than 5000 clients in over 70 countries.

OMC agencies are client focused, with firms structuring their offerings and resources around a client’s specific marketing requirements. This client-centric business model involves the collaboration of multiple agencies within Omnicom in formal and informal virtual client networks — and it allows Omnicom to execute its clients’ marketing requirements in a consistent and comprehensive manner.

Omnicom’s largest firms include creative advertising agencies BBDO and DDB Worldwide. Omnicom also owns The DAS Group of Companies, which is global group of marketing services companies that cover public relations, promotional marketing, branding, and research.

Omnicom has made several acquisitions in recent years to build its capabilities in Precision Marketing, which has now become the company’s third-largest discipline behind advertising and public relations.

This group aligns the company’s global digital, data and Customer Relationship Management (CRM) capabilities to deliver a precisely targeted and meaningful customer experience at scale. These services are enabled by the company’s omni platform that combines a powerful cultural insights engine with data insights.

Advertising has changed with the Internet, and as a result, the company is no longer growing as fast as it was at the turn of the century. However, OMC still produces consistent results, with EPS expanding from $5.10 in 2017 to $6.39 in 2021. Earnings were higher each year except for pandemic-impacted 2020. Top-line results were flattish over this period, but a better cost structure and a 4.5% decline in the share count drove the EPS gains.

The company’s results in the second quarter reflect their recent portfolio shifts. Revenues were basically flat at $3.567 billion, as the company divested several underperforming agencies, which lowered sales by 6.7%. On an organic basis, which also excludes a negative currency impact of 4.7%, sales increased 11.3%.

While there was strength across the board, Precision Marketing led the way higher, with revenues up 21%. A better revenue mix, lower interest expense, and stock buybacks allowed EPS to increase to $1.70 from $1.62.

EPS estimates of $6.60 this year and $6.75 next year (gains for next year will be limited by the absence of election advertising) appear to be realistic, and OMC is attractively valued at just over 10X forward estimates.

While a recession remains a risk, it is least partly priced into the stock, and OMC should outperform in any reasonable economic scenario. Buy OMC under $70. My target is $80. The 4% dividend yield will add to total returns.

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