Higher advertising spending buoys Omnicom profit

Reuters News
Posted: Feb 12, 2013 7:09 AM
Higher advertising spending buoys Omnicom profit

By Sruthi Ramakrishnan

(Reuters) - Omnicom Group Inc, the largest U.S. advertising company and home to agencies such as BBDO Worldwide and DDB Worldwide, reported a better-than-expected fourth-quarter profit on higher revenue in its domestic market.

Many of the macroeconomic problems cited by advertising companies over the last few quarters, including instability in the euro zone and a slowdown in China, have been easing.

Omnicom said it expects modest growth in 2013 but cautioned that uncertainty in some markets would continue to put pressure on advertising spending.

"While the macroeconomic environment appears to be stabilizing and even improving in some areas, issues in several markets remain unresolved," Chief Executive John Wren said on a conference call with analysts.

"We are cautiously optimistic as we look into the latter part of 2013 and into 2014," he said.

Advertising companies had also been concerned about the impact on advertising spending of the rancorous negotiations over the U.S. fiscal cliff during the fourth quarter.

Omnicom, the first of the major advertising companies to report results, said revenue in the United States rose 5 percent to $2.03 billion during the quarter, accounting for about half of the total revenue.

"Surprisingly strong U.S. organic growth helped buoy continued weakness in Euro markets," Jefferies analyst Will Smith wrote in a note.

Smith said Omnicom's strong U.S. revenue was a positive for WPP Plc, the world's No.1 advertising company, and Interpublic Group.

Omnicom shares, which have risen 18 percent in the last three months through Monday, rose as much as 2.5 percent to a life-high of $56.75.


Omnicom said many markets in Europe remained weak and growth was likely to be slow in the region for some time as governments continue to operate with fiscal restraint.

"Our large European markets like Russia continued to perform largely well while the UK, France and Germany remained weak and in aggregate the euro zone markets were down 3.7 percent," Chief Financial Officer Randall Weisenburger said.

"Some of the revenue decline from the region could be tracked to specific client reductions rather than the economic situation," Wren said.

Total international revenue slipped 0.3 percent, weighed by the weakness in Europe.

Net income rose to $307.1 million, or $1.13 per share, in the quarter, from $271.9 million, or 96 cents per share, a year earlier.

Revenue rose 2.4 percent to $3.94 billion.

Analysts had expected earnings of $1.09 per share on revenue of $3.93 billion, according to Thomson Reuters I/B/E/S.

(Reporting by Sruthi Ramakrishnan in Bangalore, Editing by Saumyadeb Chakrabarty)