UPDATE 2-Omnicom earnings beat estimates, bode well for Publicis

Tue Oct 15, 2013 1:06pm EDT

* Third-qtr adjusted earnings $0.82/shr vs est $0.80

* Revenue $3.49 bln vs est $3.48 bln

* Omnicom shares rise 2 pct, Publicis up 3 pct

By Sruthi Ramakrishnan

Oct 15 (Reuters) - Omnicom Group Inc, the largest U.S. advertising company, reported a better-than-expected quarterly profit as ad spending strengthened in its home market, reinforcing expectations of strong growth for the industry in the second half.

Omnicom's shares rose 2.5 percent in New York on Tuesday, while those of merger partner Publicis Groupe SA rose 3 percent in Paris ahead of its results on Wednesday.

Both Omnicom and Publicis get about half of their revenue from the United States.

The $35.1 billion merger with France-based Publicis is on track to close early next year, Chief Executive John Wren said on a post-earnings conference call.

Omnicom, home to agencies such as BBDO Worldwide and Goodby, Silverstein & Partners, said U.S. revenue rose 3.2 percent to $1.82 billion in the third quarter.

Organic revenue grew 4.1 percent overall and 5 percent in the United States.

"(Organic growth) is improving from the first half. I think it's kind of set up to be a little bit stronger in the second half," Edward Jones analyst Robin Diedrich told Reuters.

Revenue from the euro area declined by 1.6 percent organically, led by Germany and France.

Excluding merger expenses, Omnicom earned 82 cents per share, ahead of the 80 cents expected by analysts.

Revenue rose 2.5 percent to $3.49 billion.

Analysts had expected revenue of $3.48 billion, according to Thomson Reuters I/B/E/S.

Omnicom is the first major advertising company to report quarterly results.

APPROVAL PROCESS

The merger with Publicis, announced in July, has received clearances in South Korea and South Africa and the approval process was "well underway" in 44 countries, company executives said on the call.

The company said there were no plans to merge the two companies' individual agency brands.

Omnicom, whose clients include PepsiCo, Apple Inc , Microsoft Corp and AT&T, said reaction from clients and employees to the merger had been "very positive".

"I'd be much more surprised if (client losses) didn't happen in this case," said Diedrich, who downgraded the company's stock to "hold" from "buy" following the merger announcement in the expectation there would be some client defections.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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