Argus cuts Omnicom to Hold, sees Interpublic deal as ‘bit of a reach’

Argus analyst Christine Dooley downgraded Omnicom (OMC) to Hold from Buy. Over the last four years, Omnicom has streamlined its portfolio and strengthened capabilities important to its customers through acquisitions, but the company’s recent plan for an industry-shaking acquisition of rival Interpublic Group (IPG) is a bit of a reach, the analyst tells investors in a research note. While the company would wind up with a dominant position in the industry with a portfolio of blue-chip clients, it also would be taking on substantial fixed costs that would cut into margins and slow earnings, cash flow, and dividend growth for the intermediate term, Argus adds.