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Investing.com -- BofA Securities upgraded Omnicom (NYSE:OMC) to “neutral” from “underperform,” raising its price objective to $80 from a previous level, with the stock trading at $70.28.
The upgrade follows a reassessment of the company’s prospects after meetings with industry stakeholders at the Cannes Lions event.
Analysts at BofA Securities acknowledged market concerns related to Omnicom’s pending acquisition of Interpublic Group and the associated integration risks.
However, they cited increased confidence in the company’s ability to navigate both structural and cyclical challenges, leading to their revised rating.
"Our recent trip to the Cannes Lions and meeting with various industry stakeholders gave us enough confidence on both structural trends and cyclical dynamics to upgrade our rating to Neutral," they wrote.
The analysts noted that Omnicom’s shares have underperformed the market by 30% since early December, with the stock now trading at a valuation that they believe prices in a worst-case scenario.
The shares are currently trading at 8x 12-month forward price-to-earnings, near all-time lows, and at a record 65% discount to the S&P 500 average of 45%. The shares also trade at a 30% discount to Publicis, a peer in the advertising sector.
BofA Securities flagged Omnicom’s scale in the United States and the strength of its creative networks, now consolidated under the Omnicom Advertising Group banner.
They observed that while Omnicom has been less vocal than peers about its transformation, it remains well-positioned in the market.
The analysts also downplayed immediate concerns related to tariffs and restrictions on healthcare advertising.
Following the upgrade, BofA Securities increased its earnings per share estimates for 2026 and 2027 by 2% and 3%, respectively.
The 2026 adjusted EPS estimate was raised to $8.89 from $8.72, and the 2027 estimate increased to $9.58 from $9.33.
The analysts kept the 2025 EPS forecast largely unchanged at $8.38. Organic sales growth projections for 2026 and 2027 were revised to 2.0% and 3.4% respectively.
Valuation comparisons provided in the report show Omnicom trading below both its historical levels and peers.
The company’s dividend yield stands at 4% across the forecast period, with a free cash flow yield projected to rise from 11.5% in 2024 to 13.6% in 2027.