Omnicom's Sales Miss Left Everyone Confused, Especially Analysts

(Bloomberg) -- Wall Street is still figuring out how to interpret Omnicom Group’s disappointing fourth-quarter revenue and subsequent 6.6 percent drop in the advertising company’s shares Thursday. While the news prompted a downgrade from RBC Capital Markets, Macquarie and BMO Capital Markets opted instead to boost their ratings.

Investors expected more from Omnicom after upbeat reports from peers Interpublic Group and Publicis Group bolstered sentiment about an industry recovery. Shares of Omnicom had risen 14 percent over seven sessions prior to the earnings release. Meanwhile, short interest climbed to almost 14 percent of free float, according to data compiled by Markit.

RBC blamed lack of visibility in its report Friday cutting Omnicom to sector perform from outperform, saying the company’s 2018 forecast “demonstrates the opacity facing the industry.” For its part, BMO decided Omnicom’s post-earnings pullback was the opportunity it needed to recommend buying shares for the first time since 2015. And Macquarie raised its rating to neutral, saying that when taking into account comments from industry peers, it seems unlikely that cyclical and structural declines will both worsen, at least not now.

To contact the reporter on this story: Catherine Larkin in Chicago at clarkin4@bloomberg.net.

To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net, Richard Richtmyer

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