Analyst: Take Advantage Of Omnicom's 'Chunky' Q4 Report

Omnicom Group Inc. OMC reported fourth quarter results, which sent shares lower by around 7 percent Thursday. Despite a revenue miss and a drop in net income, at least one analyst turned bullish on the stock.

The Analyst

BMO Capital Markets' Daniel Salmon upgraded Omnicom Group's stock from Market Perform to Outperform with a price target boosted from $80 to $90.

The Thesis

Omnicom's earnings was "chunky" due to soft project spending, but beyond the headline numbers the stock is now attractive for three reasons, Salmon said in a note.

  • Omnicom's balance sheet is strong with a net leverage of 0.5 times and $3.8 billion in cash, the analyst said. The net leverage is at its lowest levels dating back to 2010 and positions the company to buy back its stock at the current depressed valuation. Moreover, the company can pursue acquisitions to build its business which is still a top priority.
  • Among the approximately $15 billion worth of accounts that are in view, the company is at risk of defending only $2 billion. Management's guidance likely assumes it loses some business but on the other hand its recently formed third media agency is positioned to pick up businesses across multiple verticals.
  • Omnicom's 2009 "widespread clean-up" of its portfolio generated "sustained strength" over the years and investors could expect a similar outcome with its CRM reorganization.

Bottom line, the stock's 7 percent decline and 3.1 percent dividend yield is attractive enough for Salmon to recommend buying the stock for the first time since 2015.

Price Action

Shares of Omnicom Group were trading higher by 1.5 percent Friday at $78.41.

Related Links:

Benzinga's Top Upgrades, Downgrades For February 16, 2018

36 Stocks Moving In Friday's Mid-Day Session

Posted In: BMO Capital MarketsDaniel SalmonAnalyst ColorUpgradesPrice TargetAnalyst Ratings

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.