In the wake of a June 12, 2002, Wall Street Journal story raising questions about Omnicom Group's accounting practices, the holding company's stock was trading in the low $40s. Last week, as the stock fetched nearly twice that amount, Wall Street set its sights even higher for Omnicom.
In a research update issued last Tuesday after meeting with Omnicom CEO John Wren, Merrill Lynch analyst Lauren Rich Fine, who has championed Omnicom stock throughout the volatil-ity of the last year, set a 12-month price objective of $85 for the stock. Fine underscored Omnicom's "consistent double-digit [earnings per share] track record and likely prospective growth of 10-15 percent," saying its stock deserves a 10-15 percent premium to the market. Fine estimates Omnicom will report 2003 earnings per share of $3.70.
Last month, Smith Barney analyst William Bird also upgraded his price target for the stock, raising it from $74 to $84.
During the past year, a vindicated Omnicom has regained its price momentum, even as short sellers exerted pressure on the stock, reflecting the company's fundamentals.
"Omnicom remains the industry leader, in our view, with solid new-business performance and better-than-average revenue and EPS growth," Fine wrote in releasing her new target price for the New York-based holding company. "Omnicom has suffered no major distractions, as did its peers, also explaining its above-average performance, and management transitions within its various operating units appear to be going well."
Fine also cited Omnicom's recent issue of a new convertible bond, which she said eliminated liquidity concerns.