Omnicom drops 7% on weak Q2 results; BofA’s bearish thesis remains intact
Omnicom (OMC) drops 7% on weak Q2 results; BofA’s bearish thesis remains intact
OMC
-0.32%
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Omnicom Group (NYSE:OMC) shares are down 7% in pre-market trading after the advertising firm reported second-quarter revenue that missed analyst expectations.
The company reported a profit per share of $1.81, just ahead of the consensus of $1.80. Revenue increased just 1.2% year-over-year to $3.61 billion, missing the average analyst estimates of $3.67 billion.
“While the balance of the year will continue to see economic uncertainty, we are entering a dynamic and exciting new era for our company.” Chairman and CEO John Wren said.
“Omnicom has secured leading positions in generative AI technologies and partnerships to deliver on our promise to achieve the best outcomes for our clients and increase the operational efficiency of our company.”
Organic revenue was up 3.4% YoY, while the Street was expecting an increase of 3.7%. Similarly, the consensus was expecting an operating margin of 15.8% while the Q2 report delivered a number of 15.3%.
Vital Knowledge analysts highlighted “a modest miss on organic revenue growth,” while the U.S. “saw the weakest growth of the major geographies”.
BofA analysts reiterated an Underperform rating on OMC stock and cut the price target by $5 to $79 per share.
“While valuation is undemanding (9% 2023E FCF yield), underlying profit growth is soggy in absolute and relative to peers. We do not view OMC’s miss as necessarily indicative of disappointing trends for IPG (reports Friday) or Publicis (reports Thursday) as we think both have specific, faster-growing assets and different net new business momentum trends,” analysts wrote.
