What Investors Need to Know About Omnicom Group Inc.'s Solid Q3 Earnings

Omnicom Group (OMC 1.87%) released third-quarter 2015 results Tuesday after the market closed, and the market is rightly pleased. Keeping in mind shares of the marketing and corporate communications specialist had already climbed almost 10% between the start of October and Tuesday's close, Omnicom stock held steady on Wednesday, rising another 1% as the company successfully weathered continued foreign exchange headwinds.

Omnicom results: The raw numbers

YOY: Year over year. Data source: Omnicom Group. 

What happened with Omnicom this quarter?

• Omnicom's top line benefited from a combination of better-than-expected 6.1% organic growth -- which excludes currencies, acquisitions, and divestments -- and a slight increase in revenue from acquisitions. 
• That includes a 9.9% increase in advertising revenue, a 2.8% gain in CRM, a 5.4% jump from specialty communications, and a 1.5% decline in the public relations segment.
• However, that organic growth was more than offset by the negative impact of foreign exchange, which reduced revenue by 7% in the quarter.
• Omnicom has generated more than $1.1 billion in free cash flow year to date, helping fund its acquisitions and ambitious capital returns efforts.
• So far in 2015, Omnicom has returned 108% of net income to shareholders through dividends and repurchases, maintaining a long-standing streak:

Data source: Omnicom Group.

• On a regional basis, North American organic growth was just above 6%, driven by strength in brand advertising media and Omnicom's specialty healthcare business. U.K. growth was 9%, extending its streak of consistently solid performance.
• Contintental Europe rose 4.5%, driven by strength in Germany and Spain and notably held back by weakness in France and the Netherlands.
• Asia-Pacific organic growth was over 8%, where management sees a "long runway of growth ahead."
• Omnicom acquired Cortex, a healthcare communcation agency based in Istanbul, Turkey. The purchase should bolster Omnicom's TBWA/Worldheath offerings in the country and across the Middle East.
• Omnicom also acquired digital media agency RE-MIND, as well as CRM market specialist DataOnDemand. Both are based in Paris, France, and will operate under Omnicom's Media Group network.

What management had to say 
Omnicom CEO John Wren continued to sing the praises of Annalect, a digital data and analytics group launched by Omnicom five years ago to better position the company to navigate the transition from traditional to digital advertising:

At this point, we still have an opportunity to gain additional business as the remaining pictures come to a conclusion. Annalect played a key role in each of our wins. As a result of our investments early on in Annalect and its data management platforms, we picked up a significant share of the new business in digital, specifically around data and analytics. Annalect is embedded in our accountings and is truly a differentiating asset for us.

Wren also touched on Omnicom's leadership in verifying the effectiveness of programmatic and online video ads:

We believe that third-party verification is a fundamental requirement. Publishers should not grade their own homework. For our part, since 2013, we have been providing third-party verification services in the U.S. our clients' programmatic and digital network buyers. This has been invaluable in giving us the data and visibility we need to adjust publisher pricing based upon viewability rates. [...] The ecosystem is complex, but the goal is simple -- to make sure advertisers get what they pay for. And we are working toward practical solutions to help move the entire industry forward. 

Looking forward 
Make no mistake: This stance has the potential to win Omnicom untold rapport with clients, especially given the early resistance of third-party verification by other leading digital advertisers like Facebook (META -0.52%), which previously insisted its own software verification tools were adequate. Considering advertising sales singlehandedly comprised almost 95% of Facebook's total revenue last quarter, it's little surprise the social media giant announced last month it would partner with independent measurement company Moat, effectively caving to skeptical clients' demands 

In the process, Omnicom's industry leadership is becoming that much more evident. For patient, long-term investors, that should be more than encouraging as Omnicom continues to successfully navigate today's evolving digital advertising landscape.