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Omnicom posts improved organic growth rate in North America during Q3

After weak results in the second quarter, Omnicom Group Inc. saw organic growth in North America pick up in the third quarter and is forecasting continued gains in the U.S. on some fronts.

During the three months ended Sept. 30, the agency holding company reported 2.1% organic revenue growth in North America, which is the largest regional contributor to its business mix, accounting for 57% of revenues. That represented a marked sequential improvement from the 0.2% growth in the region during the quarter ended June 30, when results were shaped by weak performances in the company’s public relations, shopping marketing and branding businesses.

A breakdown of third-quarter North America growth reflected a 2.4% advance in the U.S., which was offset by a small reduction in Canada, as well as in Puerto Rico, where the company's main focus now is on helping people and the agencies in the market recover from the devastating effects of hurricanes.

The North American amelioration was driven by Omnicom’s media, healthcare and events businesses, countered by declines in its direct marketing and branding agencies.

Speaking on an Oct. 17 earnings call, Omnicom Executive Vice President and CFO Philip Angelastro told analysts there were some ups and downs in the period. "Healthcare and events and the media businesses did well. Some of the advertising brands did well, some of the advertising brands did not do as well in North America," he said. "And then the branding and direct marketing businesses, as well as [public relations] had a down quarter in North America. So it's kind of a mix of a number of pluses and a number of minuses."

Asked if business in the U.S. had turned the corner, Omnicom CEO John Wren said he expected continued domestic improvement, assisted by some organizational and management changes.

Those include the reorganization of its CRM and digital agencies under a new operating unit. Precision Marketing Group is now being led by Luke Taylor, the former CEO of DigitasLBi.

Relative to an outlook on client spending, Wren said that in speaking to a number of CEOs the indication was that their companies will allocate more, principally as a consequence of cost-cutting measures. They are also motivated, Wren said, because they don’t want to lose market share and are facing new competitors in major business arenas.

In terms of industry mix, Omnicom said that the auto and food and beverage categories have shown increases year-to-date versus 2016. Conversely, contributions from the consumer products and travel and entertainment sectors have decreased.

Omnicom's consolidated third-quarter revenue declined 1.9% to $3.72 billion. The downturn was tied in part to the absence of contributions from divested assets that were no longer strategic fits, including certain agencies in the field marketing and events disciplines, as well as the specialty print media business unit, Novus. These dispositions, net of recent acquisitions, reduced revenue by $216 million.

Third-quarter net income attributable to the company totaled $263.6 million, or $1.13 per share, up from $253.8 million, or $1.06 per share, in the prior-year period.