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Here's Why You Should Retain Omnicom (OMC) in Your Portfolio

Zacks Equity Research

Omnicom Group Inc. OMC stock has had an impressive run on the bourse year to date. Shares have gained 9.2%, outperforming the 5.1% rally of the industry it belongs to.

With an expected long-term earnings per share growth rate of 5% and a market cap of $17.2 billion, Omnicom seems to be a stock that investors should retain in their portfolio for now.

Factors That Bode Well

Consistency and diversity of operations and increased focus on delivering consumer-centric strategic business solutions ensure persistent profitability for Omnicom.

The company’s bottom line is currently benefiting from ongoing operating efficiency initiatives, mainly in the areas of real estate portfolio management, back office services, procurement, and IT services. Change in business mix resulting from disposition of some non-core or underperforming agencies over the past year, is also aiding the bottom line.

Consistent dividend payouts and share repurchases indicate Omnicom’s commitment to create shareholders’ value and underline its confidence in the business. The company paid out $422.5 million through dividends and repurchased shares worth $545.2 million in the first nine months of 2019.

The company paid out dividends of $548.5 million, $515.2 million and $505.4 million and repurchased shares amounting to $581.3 million, $568.4 million and $602.2 million, respectively in 2018, 2017 and 2016.

Omnicom Group Inc. Dividend Yield (TTM)

Omnicom Group Inc. Dividend Yield (TTM)

Omnicom Group Inc. dividend-yield-ttm | Omnicom Group Inc. Quote

Some Risks

Despite riding on significant growth prospects, Omnicom is not free from headwinds. Negative foreign exchange rate impact and weak acquisition revenues, net of disposition revenues have been weighing on the company’s top line for the past few quarters. Nevertheless, we believe that investments toward internal development and customer-centrism bode well for Omnicom in the long run.

Zacks Rank & Stocks to Consider

Omnicom currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the broader Zacks Business Services sector are Global Payments GPN, Mastercard MA and Cardtronics CATM. While Global Payments sports a Zacks Rank #1, Mastercard and Cardtronics carry a Zacks Rank #2 (Buy).

Long-term expected EPS (three to five years) growth rate for Global Payments, Mastercard and Cardtronics is 17%, 16% and 4%, respectively.

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Cardtronics PLC (CATM) : Free Stock Analysis Report
 
Omnicom Group Inc. (OMC) : Free Stock Analysis Report
 
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Mastercard Incorporated (MA) : Free Stock Analysis Report
 
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