Strong international sales helped Omnicom, one of the world’s largest advertising groups, report surprisingly robust third-quarter earnings, even as the outlook for the sector worsens.
International revenues increased 22 per cent to $1.68bn, nearly equalling US revenues of $1.7bn, which were up 5.3 per cent.
“Geographically all of our major markets experienced solid organic growth,” said John Wren, chief executive. “This performance is particularly notable given the worsening of economic and capital market conditions since our last earnings call.”
Omnicom, which owns agencies such as BBDO Worldwide and DDB Worldwide, saw net income rise 16.4 per cent to $201.4m for the third quarter, while overall revenues were up 12.9 per cent to $3.38bn. It was the fourth consecutive quarter that Omnicom beat analyst estimates, as the company continues to rebound strongly from the recession.
“Given the doom and gloom out there, I don’t know how you don’t look at this as pretty constructive results,” said Benjamin Swinburne, Morgan Stanley analyst.
Mr Wren said growth was strongest in the UK, Germany and France. “In continental Europe, our results were quite positive in spite of the region’s sovereign debt problems,” he added.
The impact of the Japanese earthquake and tsunami continued to affect sales in Asia, Mr Wren said. “Asia, Latin America and the Middle East continue to perform very well. All are experiencing double digit growth during the quarter even though Asia continues to be negatively impacted by our performance in Japan,” he added.
But the car industry, which was hit hard by the disasters in Japan, has since rebounded.
Mr Wren shied away from making specific predictions about the fourth quarter, but said the company’s performance would be affected by “the ability of European leaders to deal with the region’s sovereign debt problems, Washington’s ability to foster economic growth, and the role that rapidly growing economies in Asia and other parts of the world will play not only economically, but politically”.
Omnicom slowed its share repurchase programme during the quarter, but acquired several new international agencies.
Many analysts still believe ad spending will grow next year, despite lingering macroeconomic concerns. “We still think advertising grows in the US next year,” said Mr Swinburne.
Sir Martin Sorrell, chief executive of WPP, the advertising group, said on Tuesday that his group had not yet seen a strong pullback from advertisers.
“September was very similar to July,” Sir Martin said at an investor day in London.
Additional reporting by Tim Bradshaw