UPDATE 3-Omnicom profit falls 21 pct but beats estimates

Mon Apr 27, 2009 1:31pm EDT

* Q1 EPS 53 cents, beats average estimate of 44 cents

* Q1 revenue $2.74 bln, in line with estimates

* Organic revenue down 6.6 pct

* Shares rise more than 5 pct (Adds executive comments, share price, byline)

By Paul Thomasch

NEW YORK, April 27 (Reuters) - Omnicom Group Inc (OMC.N) reported higher-than-expected quarterly earnings on Monday, although profit slumped 21 percent due to the crash in advertising spending as corporations ditched marketing campaigns and cut budgets.

Shares rose more than 5 percent after the earnings report, which reflected efforts to offset sharp revenue declines by cutting jobs and other costs.

Omnicom, the world's largest advertising company and home to agencies like BBDO Worldwide and DDB Worldwide, reported first-quarter earnings of $164.5 million, or 53 cents a share, down from $208.7 million, or 64 cents a share, a year ago.

The profit surpassed the 44 cents a share analysts polled by Reuters Estimates had expected. Revenue was slightly higher than expected, but nonetheless fell 14 percent to $2.75 billion amid the pullback in spending across advertising, public relations and special events.

Chief Executive John Wren said spending trends are unlikely to significantly improve before late 2009 or early 2010.

"Our major clients are in the same conservative mode as I think we are," he said. "People ... are hopeful that we're in a bottoming out period right now, that the worst is over, and as soon as that's confirmed for them, they'll put in place other plans that they have."

Omnicom, whose client list includes such corporate titans as Anheuser-Busch Cos Inc INTB.BR, McDonald's Corp (MCD.N), and Chrysler [CBS.UL], said the biggest spending cuts were occurring in the automotive sector.

But company executives said bankruptcies in the industry would not necessarily hurt advertising.

"If anybody does file for reorganization, we don't expect any restrictions on marketing," said Wren. "We would think if a new company comes out of a restructured auto industry, I would imagine those companies would be looking to aggressively move the product that they have."

Still, for the moment, Detroit's problems have severely pinched revenue at Omnicom. Executives said Chrysler's cutbacks were key to the 6.6 percent drop in the quarter's organic revenue, a closely watched industry benchmark that excludes foreign currency impact and recent acquisitions.

Omnicom sought to offset some of the organic revenue decline with cost cutting, having eliminated jobs in both the fourth quarter and first quarter.

Savings from the first-quarter job cuts is expected to be around $125 million, the company said, but did not provide a number on the number of positions it reduced.

Overall, costs fell 13 percent in the quarter, it said.

Shares of Omnicom were up $1.53 at $30.90 on the New York Stock Exchange. (Reporting by Paul Thomasch; editing by John Wallace and Steve Orlofsky)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.