Despite its battle with currency exchange rates, Omnicom Group (OMC - Get Report)  posted a modest rise in revenues, the result of increased add spending.

Fourth quarter 2016 results were largely positive for the marketing and communications company which is outpacing its larger rivals, WPP, Publicis Groupe and Interpublic Group of Companies.

Earnings per share (EPS) for the quarter rose twelve cents, or 8.9%, to $1.47 versus the same quarter in 2015. Worldwide revenues were up 2.1% year-over-year to $4.2 billion, driven by organic growth and incoming acquisitions.

While the company's North American arm was roughly flat, U.K. and other European markets, along with the Asia-Pacific region witnessed a steady upswing. However, the Middle East & Africa was the fastest growing region with 29% year-over-year growth.

Overall operating margins grew 14.2% year-over-year in the quarter, and net income was up by 5.6%, to $350.3 million.

By the sheer strength of its size, Omnicom has steadily extended its client base, in the process, bludgeoning rivals. For instance Publicis Groupe, once the target of a merger with Omnicom, posted a loss in market share.

Omnicom and WPP are well aware of the rising importance of digital spending for their businesses. In the U.S. alone, spending for the top 200 advertisers is over $140 billion. Additionally, the American retail industry is set to spend over $15 billion on digital ads in 2016.

Beyond business fundamentals, Omnicom carries a healthy balance sheet with nearly $2 billion in cash and around $5 billion in debt. WPP, on the other hand, has a heavy debt-burden and a similar amount in cash.

Add to that a five-year earnings growth outlook of approximately 7% annually, and it's likely that Omnicom's financial structure will allow it to continue to drive profits consistently.

Omnicom's cash balance should allow it to pursue growth opportunities, while ensuring its attractive 2.6% dividend yield. The company's cumulative payout ratio of 106% over the last decade proves that it is committed to providing value to its shareholders.

To be sure, Omnicom must manage currency exchange headwinds. Currency volatility is an ongoing problem for large, multinational businesses.

Also, the stock is trading around its all-time high at around $85 per share.

Still, the stock has the potential for further upside. Investors should look for any dips. 


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The author is an independent contributor who at the time of publication owned none of the stocks mentioned.