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Omnicom's (OMC) Diversity & Dividends Aid, Low Liquidity Ails

Omnicom Group Inc. OMC has a consistent track record of shareholder-friendly steps and a healthy bottom line.

Management reported impressive second-quarter 2022 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate. Earnings of $1.68 per share beat the consensus mark by 7.7% and increased 15.1% year over year, driven by a strong margin performance. Total revenues of $3.6 billion surpassed the consensus estimate by 4.4% but declined slightly year over year.

Factors Favoring OMC

Omnicom has a history of returning value to its shareholders through dividends and share repurchases. In 2021, the company paid out dividends of $592.3 million and repurchased shares amounting to $527.3 million. It paid out $562.7 million of dividends and bought back shares worth $222 million in 2020. In 2019, OMC paid out $564.3 million as dividends and repurchased shares worth $610.2 million. Such moves instill investors’ confidence in the stock and make earnings per share accretive to it.

Omnicom’s bottom line is in good shape as the company continues divesting its underperforming and non-core businesses and reorganizing the portfolio to meet clients’ ever-changing needs.

The recent acquisition of dotdotdash by TBWAWorldwide, a unit of Omnicom, is expected to boost its capability of delivering disruptive brand experiences, using a flexible working model and specialized skills.

TBWAWorldwide serves global clients like McDonald's MCD, adidas ADDYY, Apple and Hilton Hotels. Prior to the acquisition, TBWA and dotdotdash collaborated on several projects for more than a year. Most recently, TBWA engaged dotdotdash on McDonald's and adidas.

We believe, the consistency and diversity of Omnicom's operations and its deepened focus on delivering consumer-centric strategic business solutions, ensure its long-term profitability.

Some Risks

Omnicom's current ratio (a measure of liquidity) at the end of the June quarter of 2022 was pegged at 0.95, lower than the current ratio of 1.00 at the end of June 2021. Decreasing current ratio is not desirable as it indicates that a company may have problems meeting its short-term debt obligations.


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