OMC Omnicom Group Inc

By Nick Kostov 

Advertising giant Omnicom Group Inc. reported better-than-expected earnings, easing investor concerns over the advertising industry's ability to weather technological disruption.

While Omnicom was dragged down by its customer-relationship marketing execution and support group, the company said it had seen a pick up in client spending in the third quarter and sounded an optimistic note for 2019.

"A lot of clients are spending not huge sums more but they are spending money and I think that's a trend that will only continue as we go forward," Omnicom Chief Executive John Wren said during the company's earnings call.

The world's second-largest ad company by revenue said third-quarter net income increased to $298.9 million, or $1.32 a share, up from $263.6 million, or $1.13, a year earlier. Profit was helped by a lower U.S. tax rate and growth in Europe.

The company's revenue fell 0.1% to $3.71 billion, hurt by unfavorable foreign-exchange rates and a lackluster performance in North America.

Analysts polled by FactSet were expecting earnings of $1.24 a share on $3.71 billion in revenue.

The holding company, which owns creative and media agencies such as BBDO and OMD, reported 2.9% organic revenue growth, a closely watched metric that excludes currency effects and acquisitions. That exceeded analysts' average expectation of about 2.7%, according to FactSet, as well as organic revenue growth in earlier quarters this year.

Omnicom and other ad giants had previously said they believed the second half of the year would be stronger than the first.

Organic revenue was up 0.6% in the U.S., 6.9% in Europe, 14% in Asia Pacific and 1.7% in Latin America. The measure dropped 0.3% in the U.K. and fell 0.4% in the Middle East.

Omnicom's shares rose more than 7% in morning trading, while those of Europe-based rivals WPP PLC and Publicis rose 1.7% and 3%, respectively.

As with its rivals, Omnicom is under pressure from increased competition from consulting firms, marketers cutting back on the fees they pay ad agencies, and changes in consumer behavior.

"We haven't lost any large clients," Mr. Wren said. "We've had some pretty handsome wins which should start to kick in during the first quarter next year."

On Omnicom's call, Mr. Wren said the company had "accelerated" certain planned cost cuts and real estate consolidation during the period.

In all, Omnicom sold 19 companies in the third quarter, resulting in a reduction of its workforce by roughly 7,000 people, Mr. Wren said. Most of the businesses sold were part of Omnicom's CRM execution and support group, which offers services such as research, field marketing, point-of-sale, sales support and merchandising.

Omnicom said it had reduced head count in its continuing operations by more than 1,400 people during the quarter.

The company booked a gain from disposals amounting to $178.4 million, primarily from the sale of Sellbytel, its European-based provider of outsourced sales, service and support, but took a $149 million charge in connection with the repositioning of its business.

Write to Nick Kostov at Nick.Kostov@wsj.com

(END) Dow Jones Newswires

October 16, 2018 11:39 ET (15:39 GMT)

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