UPDATE 3-Omnicom profit falls, sees recovery later in year

Wed Feb 10, 2010 12:56pm EST

* Q4 EPS 73 cents; Wall St. estimate 72 cents

* Revenue down 3.1 pct to $3.27 bln; estimate $3.18 bln

* Sees sustained organic rev growth in latter half of 2010

* Shares rise 1.7 percent (Adds details, company and analyst comment, byline)

By Franklin Paul

NEW YORK, Feb 10 (Reuters) - Omnicom Group Inc (OMC.N) said on Wednesday its quarterly earnings fell 15 percent as depressed corporate marketing budgets, particularly from auto makers, undercut profit from its network of advertising and media agencies.

Home to agencies including BBDO Worldwide and DDB Worldwide, Omnicom said its automotive business was down 25 percent, but said it expects to see growth later this year as effect of the global economic slowdown abates.

"While the economic challenges are not behind us and the results of businesses vary by business type and geography, we have begun to see optimistic signs of recovery and more widespread areas of stability," Chief Executive Randall Weisenburger said on call with analysts.

Omnicom, whose clients include Anheuser-Busch, McDonald's and Pfizer, said the fourth quarter was the "toughest economic period" in its history. Its net income was $229.6 million, or 73 cents a share, down from the $271.0 million, or 87 cents a share, a year earlier.

The results were slightly higher than the 72 cents a share profit that was expected on average by Wall Street analysts, according to Thomson Reuters I/B/E/S.

Revenue at Omnicom, declined 3.1 percent to $3.27 billion, but outpaced estimates of $3.18 billion. International revenue increased 1.5 percent, while domestic revenue fell 7.3 percent.

Also better-than-expected was Omnicom's organic revenue, a closely watched industry benchmark that excludes foreign currency impact and recent acquisitions, which decreased by 6.3 percent. Analysts had expected a decline of about 9 percent.

Omnicom said it expects a return to sustainable organic revenue growth in the second half of 2010.

RECRUITMENT, MARKETING STILL SOFT

The results come one day after Walt Disney Co posted solid quarterly results [ID:nN09214907] bolstered in part by a recovering advertising market, although one analyst characterized the market as merely "getting less bad."

So far, the media industry has seen pockets of growth in advertising, largely limited to national cable television and Internet search. But broadly, spending is still under pressure, with corporations hesitant to open up their wallets for the sort of costly marketing campaigns that are the lifeblood of advertising agencies.

Omnicom said its recruitment, marketing and advanced businesses continued to suffer, weighing down good overall performances for advertising and marking services.

RBC Capital Markets analyst David Bank called Omnicom's report incrementally positive, and he was not put off by the notion that its recovery will not gather steam until later in the year.

"They are in a bunch of businesses that ... have been lagging," he said. "It would have been worrisome if you didn't see the trajectory moving in the right direction."

Looking ahead, Omnicom said its January business was positive, but expects a "modest financial challenge" in the first quarter, when organic revenue will again decline compared to one year ago.

The company added that it expects to be "more aggressive" with acquisitions than in the past, and is considering raising its dividend and resuming a share repurchase program.

Omnicom shares rose 58 cents to $35.83 in midday trade on the New York Stock Exchange. The shares have slipped about 10 percent so far this year, but are still up more than 25 percent from a year ago. (Reporting by Franklin Paul; editing by John Wallace, Derek Caney and Bernard Orr)

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