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By Paul Thomasch
NEW YORK, Feb 12 (Reuters) - Omnicom Group Inc (OMC.N) on Tuesday reported a 13 percent rise in quarterly profit, sending its shares higher even as the world’s largest advertising services company issued cautious comments about the economy.
Shares of Omnicom, home to advertising agencies such as BBDO Worldwide and DDB Worldwide, were up 4 percent in morning trade on the New York Stock Exchange after it reported stronger earnings and better-than-expected revenue for the fourth quarter.
The first question asked of Chief Executive John Wren on an analyst call to discuss earnings, however, centered on the troubled U.S. economy rather than last quarter’s results.
“Most of our clients are under some pressure from commodity prices and the rest for their own businesses,” Wren said. “They’re concerned with the effectiveness of the marketing efforts. That has been a theme for a long time, but it gets punctuated a bit when you have unsettling economic times.”
Wren said clients are “a little bit nervous about the economy,” but added that there was no evidence of any “major or serious cutbacks in spending as of today.”
Since companies will sometimes sacrifice spending on marketing when feeling budget pressures, comments from the top advertising companies are often used as one barometer of economic health. That is particularly the case when it comes to Omnicom, with a client list that includes such heavyweights as Anheuser-Busch (BUD.N), McDonald’s (MCD.N), and Chrysler.
Omnicom’s quarterly results would suggest that it has so far weathered the downturn, with profit rising to $313.9 million, or 96 cents a share, from $277.2 million, or 81 cents a share, a year earlier.
Worldwide revenue rose 12.7 percent to $3.63 billion, with U.S. revenue up 9.5 percent and international revenue up 16.3 percent.
Analysts had been expecting earnings of 95 cents per share on revenue of $3.57 billion, according to Reuters Estimates.
Organic revenue, a closely watched industry benchmark that excludes foreign currency impact and recent acquisitions, rose 6.6 percent in the quarter, helped by some $381 million in new business it won during the quarter.
The quarter’s net new business, which totaled $4.6 billion for all of 2007, came despite losing some work for AT&T (T.N) and Dell DELL.O.
Shares of Omnicom were up $1.80 to $47.26. (Reporting by Paul Thomasch; editing by Mark Porter/John Wallace)