Why Omnicom (OMC) Stock Is Down Today

NEW YORK (TheStreet) -- Shares of Omnicom Group (OMC) are down -1.99% to $70.07 after CEO John Wren said he was was unable to predict when its $35.1 billion merger with France's Publicis Groupe SA (PUBGY) would close. Reuters reports.

The deal reportedly hasn't won some key approvals.

Yesterday, the advertising agency reported that 2014 first quarter revenue increased 3.0% to $3,502.2 million from $3,398.9 million in the first quarter of 2013.

Net income available for common shareholders was $201.4 million, or 77 cents per share, from $199.7 million, or 76 cents per share, a year earlier.

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TheStreet Ratings team rates OMNICOM GROUP as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

"We rate OMNICOM GROUP (OMC) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, solid stock price performance, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 3.9%. Since the same quarter one year prior, revenues slightly increased by 2.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displaying stagnant earnings per share.
  • Net operating cash flow has increased to $1,449.10 million or 25.87% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -11.98%.
  • OMNICOM GROUP reported flat earnings per share in the most recent quarter. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, OMNICOM GROUP increased its bottom line by earning $3.72 versus $3.61 in the prior year. This year, the market expects an improvement in earnings ($4.05 versus $3.72).
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • Even though the current debt-to-equity ratio is 1.14, it is still below the industry average, suggesting that this level of debt is acceptable within the Media industry. Regardless of the somewhat mixed results with the debt-to-equity ratio, the company's quick ratio of 0.76 is weak.
  • You can view the full analysis from the report here: OMC Ratings Report
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