Omnicom outperforms expectations with Q3 earnings

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Credit: Omnicom

Advertising holding company Omnicom Group reported better-than-expected third-quarter earnings Tuesday morning — with CEO and chairman John Wren saying he's optimistic after a slew of "handsome" wins (which include BBDO's Ford global creative win last week) and a return to spending for clients.

The results come after a second quarter that wasn't pretty for Omnicom and some of its peers. In July, after posting sluggish second-quarter results, the group's stock suffered its biggest decline in nine years.

The holding company saw organic revenue growth of 2.9 percent in the third quarter, while worldwide revenue fell 0.1 percent to $3,714.3 million from $3,719.5 million in the same period a year ago. Organic growth in the third quarter in the U.S. was 0.6 percent.

In a research note, Pivotal Research senior analyst Brian Wieser wrote that the company's performance can be viewed as relatively favorable for the quarter, "although interpreting Omnicom's results remains a challenging endeavor when comparing them vs. peers given the scaled and mostly non-specified presence of remaining principal-based activity in organic revenue figures at Omnicom, especially including revenue streams associated with entities or products such as Icon (barter) and OmNet (proprietary trading of traditional media)."

Omnicom leaders said that during the quarter the company completed the previously announced disposition of Sellbytel as well as 18 other companies that were "no longer aligned with our long-term strategy." The group said it reduced headcount by about 7,000 people as a result of these changes..

During the quarter, the group also "took actions to reduce our staff in our ongoing operations by over 1,400 people with annual payroll of $135 million," Wren said, which include retirements and some positions that will be replaced to meet agencies' current needs. Omnicom also consolidated real estate, moving to open, campus-style hubs, Wren said.

Wren touched on recent wins including Ford's decision to tap BBDO as its lead global brand creative agency after a massive review, as well as WarnerMedia consolidating U.S. media work with Hearts & Science.

"Our philosophy is that individual agencies driven by strong cultures will continue to exist as incubators of creativity," he said, adding that the Ford win reinforces the holding company's view that "clients continue to recognize the increasing importance and the power of big creative ideas to differentiate customer experiences and transform brands."

He added that most clients are no longer looking to cut back spending. "They're looking to invest in their own businesses," he said.

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