On Mar 24, Zacks Investment Research updated the research report on premier advertising services provider Omnicom Group Inc. OMC.

Omnicom is one of the largest advertising, marketing and corporate communications companies in the world. The company’s agencies operate in all the major markets across the globe and provide extensive range of services, which are grouped into four fundamental disciplines: 1) Traditional Media Advertising, 2) Customer Relationship Management, 3) Public Relations and 4) Specialty Communications.

In order to expand its client base, Omnicom is actively focusing on the acquisition of complementary companies across the world. These accretive acquisitions have enabled the company to build up a diversified global presence to mitigate its operating risks.

In November last year, Omnicom acquired Grupo ABC – the largest Brazilian diversified advertising firm, for 1 billion reais ($270 million). Grupo ABC is a conglomerate of 15 different companies and focuses on three strategic pillars: Advertising, Branding Services and Content. Each of the member companies brings to the fore a common culture based on corporate values and goals and work in a multidisciplinary way to ensure diversity to the group. The transaction augmented Omnicom's regional presence in Brazil, which is arguably one of the largest economies in Latin America.

Earlier, Omnicom bought the U.K.-based brand and retail agency Haygrath through its subsidiary RAPP. The strategic buyout enabled the company to offer expert marketing and communication services by integrating Haygarth's expertise in fast-moving consumer goods marketing with RAPP's data insight, media and technology proficiency. Also, Omnicom’s TBWA Worldwide acquired an independent German advertising agency Heimat, which enhanced its European portfolio. Omnicom’s Adelphi acquired healthcare brand and research agency – The Planning Shop international (TPSi), to boost its global research and insight capabilities in the United States and Europe. We expect the company to witness higher revenues in the future on the back of these acquisitions.

However, Omnicom forms a part of the communications industry which is highly competitive in nature. Various agencies and media service providers compete with each other to maintain existing client relationships and to win new clients. Also, keeping in view the service-oriented nature of the whole industry, it becomes imperative for the company to increase the count of talented employees as well as retain the existing ones. These factors are likely to undermine its growth potential to some extent.

Nevertheless, we remain encouraged with this Zacks Rank #3 (Hold) stock. Some other better-ranked stocks in the industry include Marin Software Incorporated MRIN and MDC Partners Inc. MDCA, both carrying a Zacks Rank #2 (Buy) and YuMe, Inc. YUME, sporting a Zacks Rank #1 (Strong Buy).

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