Shares of Omnicom ( OMC) and Interpublic Group ( IPG) went their separate ways Tuesday as reassurances from the former failed to inspire the latter. Advertising giant Omnicom jumped 12% to $52.95 after meeting analysts' second-quarter profit estimates of $1 a share on better-than-expected revenue of $1.92 billion. Interpublic, on the other hand, fell 6% to $14.03 after saying Monday that it would delay filing its second-quarter results by at least a week. In response, Salomon Smith Barney downgraded the stock and Standard & Poor's placed the firm's ratings on credit watch with negative implications. Omnicom calmed some concerns about its own accounting practices after saying in a conference call that auditor KPMG, which replaced Arthur Andersen earlier this year, has approved a controversial private partnership.
One Omnicom short-seller termed accounting issues the hot potato of the advertising industry, to be passed from one conglomerate to the next. "IPG is going to bleed for the next week," said the short-seller, speaking on condition of anonymity. "I'd be surprised if people want to jump in with OMC in the meantime." Omnicom has said that its CEO and CFO intend to certify their financial statements next week, and Lauren Fine, an analyst at Merrill Lynch, said the firm's disclosure has improved "dramatically" with a 35-page investor presentation that included information on credit, acquisitions and earnout payments among other things. Earnouts are contingent payments that holding firms still owe on acquired businesses. Omnicom estimated at the end of the second quarter that these obligations would be $415 million, which is larger than some analysts had expected. SunTrust Robinson Humphrey has noted that these are not carried on the firm's balance sheet as a liability. at Interpublic , or if the company is taking a belt and suspenders approach to its preparation for the Aug. 14 certification deadline," Salomon analyst William Bird said. George Mannes contributed to this story.