April 17, 2018 / 10:49 AM / 7 months ago

Ad firm Omnicom's profit beats on gains in European markets

(Reuters) - Omnicom Group Inc’s (OMC.N) first-quarter profit and revenue topped analysts’ estimates on Tuesday, as the advertising group’s weak performance in North America was offset by strong demand in Europe and a weaker dollar.

Shares of Omnicom, home to agencies such as BBDO Worldwide, TBWA Worldwide and Goodby, Silverstein & Partners, rose 2.6 percent to $75.99 in midday trading.

Counted among the world’s “Big Four” traditional ad companies, Omnicom competes with the world’s biggest advertising company WPP (WPP.L), Publicis (PUBP.PA) and Interpublic (IPG.N).

Omnicom’s organic revenue rose 9.7 percent in European markets at a time when its London-based rival WPP is on the back foot after the exit of founder Martin Sorrell following allegations of misconduct.

The weaker dollar - which fell 10 percent against a basket of currencies .DXY and 14 percent against the euro EUR= last year - helped Omnicom rake in higher overseas revenue, adding 4.2 percent to overall growth.

Global ad agencies are adjusting to a new reality where internet giants Google (GOOGL.O) and Facebook (FB.O) have transformed the sector by using targeted ads.

The companies are also struggling with a tightening of purse strings by erstwhile big advertisers and the loss of market share to firms including Accenture (ACN.N) and IBM (IBM.N), which have built big marketing businesses in recent years through acquisitions.

Omnicom’s ad and media revenue in North America, its largest market, declined mainly due to account losses last year.

“This performance continues to lag solid US/global GDP growth despite the potential for tax reform to lift advertising budgets,” Morgan Stanley analyst Benjamin Swinburne wrote in a client note.

Omnicom reported a 2.4 percent rise in total organic revenue - a keenly watched measure that excludes foreign exchange rate changes and mergers. Analysts on average had expected an 1.5 percent rise, according to research firm FactSet.

In comparison with the big gain in Europe overall, organic revenue rose just 3.1 percent in the United Kingdom and fell 0.1 percent in North America.

Omnicom, said total revenue rose 1.2 percent to $3.63 billion in the first quarter.

The company, whose clients include Apple (AAPL.O), McDonald’s Corp (MCD.N) and Adidas (ADSGn.DE), said net income attributable to the company rose to $264.1 million, or $1.14 per share, from $241.8 million, or $1.02 per share, a year earlier.

Analysts’ on average estimated a profit of $1.06 per share, according to Thomson Reuters I/B/E/S.

Reporting by Arjun Panchadar in Bengaluru; Editing by Shailesh Kuber

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