Shorts Pile on Omnicom Stock Before Earnings

Dividend investors may be missing out on OMC

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Omnicom Group Inc. (NYSE: OMC) is an American global media, marketing, and corporate communications company. OMC's branded networks and numerous specialty firms provide advertising, strategic media planning and buying, digital and interactive marketing, direct and promotional marketing, public relations, and other specialty communications services to over 5,000 clients in more than 70 countries. At last check, OMC is trading up 0.8% at $74.37.

On Oct. 11, Omnicom Group announced that the leadership team will publish its third-quarter results on Tuesday, October 19 after the market closes. OMC will also host a conference call to review the financial results on the same day. Omnicom has outperformed earnings expectations on every single earnings report over the past 12 months.

For Q3 of 2020, Omnicom beat analysts’ estimates by a margin of $0.14, reporting an EPS of $1.21. For Q4 of 2020, OMC's EPS increased to $1.90, beating expectations by a margin of $0.25. For Q1 of 2021, Omnicom posted a decrease in earnings, dropping to $1.33 per share. However, the marketing brand still beat estimates by a margin of $0.20. In the most recent quarterly report for Q2 of 2021, Omnicom reported an EPS of $1.46 and beat expectations by a margin of $0.08. 

Omnicom stock has increased 41% in price year-over-year and is up 67% since bottoming at an eight-year low of $44.50 last October. Additionally, shares of OMC have grown 18% year-to-date, yet Omnicom stock is currently down 13% from its May four-year high of $86.38. Also worth noting is overhead pressure at the 180-day moving average, which emerged in mid-August.

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From a fundamental point of view, Omnicom stock offers an intriguing opportunity for value and dividend investors. OMC currently trades at an attractive price-earnings ratio of 11.86 and has a forward dividend of $2.80, which is equivalent to a dividend yield of 3.72%. In addition, Omnicom stock has a forward price-earnings ratio of 11.52, indicating a slight expected increase in earnings.

Short interest has climbed nearly 7% during the past two reporting periods, and now accounts for 6.3% of the stock's total available float. At OMC's average pace of daily trading, it would take shorts just under nine days to buy back their bearish bets.

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