* Third-quarter earnings $0.74/share vs est $0.72/shr
* Revenue $3.41 bln vs est $3.42 bln
* Shares fall nearly 3 pct
By Sruthi Ramakrishnan
Oct 16 Omnicom Group Inc, the largest
U.S. advertising company, said the looming "fiscal cliff" in the
United States and the leadership transition in China are
creating uncertainty among clients, making it difficult to
forecast the next few quarters.
However, the company said it was benefiting as customers
spread their advertising budgets among fewer agencies.
"With China being off a little bit, Europe not solved yet
and the uncertainty with the fiscal cliff as people await the
election, there's conservatism," Chief Executive John Wren said
on a conference call with analysts.
"We're not certain yet what the outcome is going to be in
the fourth quarter or into the first quarter of next year."
The "fiscal cliff" refers to the $500 billion or so of tax
hikes and the more than $100 billion in government spending cuts
that will automatically start on Jan. 2 unless politicians agree
on a budget deal.
Omnicom shares were down nearly 3 percent at $50.95 on the
New York Stock Exchange on Tuesday.
Analysts on average are expecting fourth-quarter revenue of
$3.97 billion and annual revenue of $14.29 billion, according to
Thomson Reuters I/B/E/S.
Wren said the company's teams in Europe have been facing the
"most challenging conditions" in its global footprint.
Revenue from euro zone fell 14.4 percent during the third
quarter. Third-quarter growth in Germany, France and the
Netherlands was negative, the company said.
Wren said the modest reduction in revenue growth in China
was temporary and growth will return after the leadership
transition is completed.
GAINING FROM CONSOLIDATION
Omnicom, home to advertising, media and public relations
agencies such as BBDO Worldwide, DDB Worldwide, TBWA Worldwide
and Fleishman-Hillard, said it was benefiting from the account
consolidation in the advertising industry.
PepsiCo Inc, a longtime Omnicom client, said in
February it reduced the number of advertising agencies in North
America, while raising marketing spend between $500 million and
$600 million this year.
"I think this (account consolidation) trend will only
continue because most of the major companies around the world
are under some degree of pressure to become more efficient.
That's where we are today, and I think, as we go into 2013,"
Evercore Partners analyst Douglas Arthur said Wall Street's
growth expectations from Omnicom for 2013 are too high.
"Nothing in this quarter tells me that I am wrong on that,"
Analysts' estimates for annual revenue for 2013 are $14.93
billion, while Arthur expects revenue of $14.80 billion.
NARROW PROFIT BEAT
Net profit rose slightly to $203.9 million, or 74 cents per
share, in the third quarter, from $203.7 million, or 72 cents
per share, a year earlier, reflecting fewer shares outstanding.
Revenue rose to $3.41 billion from $3.38 billion.
Analysts had expected earnings of 72 cents per share on
revenue of $3.42 billion, according to Thomson Reuters I/B/E/S.
International income, which accounts for nearly half of the
company's revenue, declined 1.7 percent in the quarter. Domestic
revenue rose 3.2 percent.
The company said a strong dollar caused a revenue decline of
about 6.9 percent, or $115 million, in the quarter.
Revenue from UK was flat due to a slowdown in field
marketing despite the Summer Olympics-related spending.
The company competes against WPP Plc, Interpublic
Group and Publicis Groupe.