Omnicom Takes a Wild Ride

In a week that reflected the jittery nerves of investors, Omnicom Group’s shares closed at $72.69 on Friday, down 3.74 percent from its opening price.

Given the acquisitive nature of the industry in general, and Omnicom’s role as a bellwether among ad stocks, other industry players like Interpublic Group and WPP Group also have shown greater volatility than usual in the past ten days.

The dive in Omnicom’s share price, which has dropped 18 percent since May 28, marks one of the more bizarre episodes in the category’s recent trading history. The ad industry’s star Wall Street performer last week fell prey to rumors about an upcoming story in The Wall Street Journal that focused on Seneca, the investment partnership housing Omnicom’s Internet agency holdings. Several analysts rushed out research reports acknowledging the rumors. Also last week, word surfaced that trustee and audit com mittee head Robert Callander, 72, resigned the day after the company’s May 21 annual meeting. Like many companies that have used the embattled Arthur Andersen, Omnicom is looking for a new auditor.

Omnicom issued a statement last Friday saying it knew of no corporate development to account for its stock activity. And it reaffirmed analysts’ estimates, stating that second-quarter earnings should come in at $1 a share, with the company showing a 10 percent increase in year-to-year revenue and profits.

The confluence of vague rumors and board resignation fueled questions about Omnicom’s robust bill ings growth. Yet the analysts who issued reports on Friday all voiced their belief in the company’s pros pects and either upgraded or reiterated their “buy” recommendations.

On May 30, Merrill Lynch, in a report by analyst Lauren Rich Fine, downgraded its rating on Omnicom’s stock to a “buy” from a “strong buy,” nonetheless concluding Omnicom “remains the highest quality name in the ad/marketing services sector.” By week’s end, as the market drove Omnicom’s shares lower, Merrill upgraded its recommendation back to “strong buy.”