Omnicom Group (NYSE:OMC) released solid third-quarter 2018 results early Tuesday, including strong organic growth from both Europe and Asia, a notable improvement in U.S. organic growth, and a flurry of cost-reduction and dispositions activity.

With shares of the marketing communications leader up 6.7% in early trading, let's dig deeper to see what drove Omnicom Group over the past few months.

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IMAGE SOURCE: GETTY IMAGES.

Omnicom Group results: The raw numbers

Metric

Q2 2018

Q2 2017

Year-Over-Year Growth

Revenue

$3,714.3 million

$3,719.5 million

(0.1%)

Net income (available for common shares)

$298.9 million

$263.3 million

13.5%

Net income per common share (diluted)

$1.32

$1.13

16.8%

DATA SOURCE: OMNICOM GROUP. 

What happened with Omnicom this quarter?

  • Omnicom doesn't provide specific quarterly top- or bottom-line guidance. So for perspective, most analysts were looking for lower earnings of $1.21 per share on an even $3.7 billion in revenue.
  • The change in revenue included organic revenue growth of 2.9%, a negative impact of 1.7% related to foreign exchange rates (greater than the 1% management was modeling), and a 0.9% decline in acquisition revenue net of dispositions (roughly in line with expectations). The company's adoption of new (ASC 606) accounting standards also reduced the top line by roughly 0.4%.
  • Organic revenue grew 0.6% in the U.S., 6.9% in the Euro markets and other Europe, 13.6% in Asia-Pacific, and 1.7% in Latin America. Organic revenue declined 5.4% in the "other North America" segment, and fell 0.3% in the U.K. and 0.4% in the Middle East/Africa regions.
  • As measured by "fundamental discipline," advertising revenue grew 4%, CRM consumer experience revenue climbed 5.5%, public relations rose 2.3%, healthcare increased 2.9%, and CRM execution and support revenue declined 3.6%.
  • Omnicom's Clemenger Group subsidiary acquired a majority stake in Levo Digital, an Australia-based marketing services and technology specialist.
  • Omnicom Precision Marketing Group also purchased a majority interest in Credera, a U.S.-based consulting and marketing technology solutions leader.

What management had to say

During this morning's conference call, Omnicom chairman and CEO John Wren described it as a "very busy quarter" in which the company "successfully executed many of the repositioning plans and dispositions" that it discussed three months ago, including its disposition of Sellbytel and 18 other smaller companies, primarily from within its CRM disciplines. With that, Omnicom reduced its headcount by 7,000 people -- including roughly 1,400 people from continuing operations -- while simultaneously accelerating other planned cost reduction and real estate consolidation initiatives. 

Wren also outlined several notable business wins during the quarter: Ford named Omnicom's BBDO as its new global creative agency, for example, while AT&T's recently formed Warner Media Group is consolidating its entire U.S. media business with Omnicom's Hearts & Science agency. These wins should position Omnicom nicely for improved U.S. performance in the coming year.

Looking forward

Assuming currencies remain steady in the fourth quarter, Omnicom CFO Phil Angelastro added that foreign exchange will likely reduce reported revenue by roughly 1.5% to 2% in the fourth quarter. Omnicom also anticipates a net reduction of revenue from acquisitions (net of dispositions) in the range of 2.5% to 3% in Q4.

All things considered, it's clear that Omnicom has made big strides in the right direction with regard to both organic growth and repositioning its portfolio of agencies to better align with its long-term direction. With shares down around 5% year to date leading up to this report, it's no surprise to see the stock rebounding in response today.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends Ford. The Motley Fool has a disclosure policy.