February 15, 2018 / 11:55 AM / 10 months ago

Omnicom revenue misses on lower client spend, shares drop

(Reuters) - U.S. advertising company Omnicom Group Inc (OMC.N) on Thursday reported fourth-quarter revenue that missed Wall Street estimates due to lower spending by clients in North America and the healthcare sector.

Shares of New-York based Omnicom, one of the world’s “Big Four” traditional advertising companies, were down 5.8 percent at $77.97.

Cut back in client spending, as well as consulting firms such as Accenture (ACN.N) and IBM (IBM.N) have taken away market share from traditional advertising companies in recent years by expanding their marketing divisions.

Omnicom’s organic revenue fell 0.8 percent in North America, largely below analysts’ expectations of a 1.3 percent rise, according to research firm FactSet.

The drop in organic revenue from North America was due to reduction in client spending, including lower political spend in PR related to the 2016 elections, Chief Financial Officer Philip Angelastro said on a call with analysts.

Omnicom, which houses advertising agencies such as BBDO and DDB, reported a rise of 1.6 percent in organic revenue for the reported quarter, below FactSet estimates of 2.25 percent.

“In the U.S., several of our ad agencies, and in particular, our independent brands, experienced client losses earlier in 2017, that are still cycling through and will continue to do so in the first part of 2018,” Chief Executive Officer John Wren said on the call.

Omnicom expects organic revenue — which excludes the impact of foreign exchange and mergers — to grow between 2 percent and 3 percent in 2018, which was in line with what its peer Interpublic Group (IPG.N) had forecast on Wednesday.

However, Interpublic had reported higher-than-expected earnings for the fourth quarter, signaling that client spending may be ticking up after a year-long slowdown.

Omnicom, whose clients include Apple (AAPL.O), McDonald’s Corp (MCD.N) and Adidas (ADSGn.DE), said net income attributable to the company fell to $254.4 million, or $1.09 per share, in the quarter ended Dec. 31, from $350.3 million, or $1.47 per share, a year earlier.

New York-based Omnicom incurred a charge of $106.3 million in the reported quarter due to changes in the U.S. tax law.

Revenue fell 1.5 percent to $4.18 billion, missing analysts’ estimates of $4.21 billion, according to Thomson Reuters I/B/E/S.

Excluding items, the company earned $1.55 per share, beating estimates of $1.54.

Reporting by Sonam Rai in Bengaluru; Editing by Savio D'Souza and Shounak Dasgupta

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