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Merrill Trims Omnicom to 'Near-term Buy'


Merrill Lynch downgraded Omnicom Group (OMC) to near-term buy from strong buy.

Analyst Lauren Rich-Fine says she downgraded largely on valuation. Rich-Fine believes growth will stay in the mid-teen range over the next few years rather than approach the 20% rate of the late '90s.

She notes shares are trading at a 19% premium to the S&P 500, in line with the 20%-25% premium historical average; it would not seem to indicate over 20% intermediate term returns -- which she says would warrant a near-term, strong buy rating.

Rich-Fine says she doesn't expect shares to return to their peak 35%-45% premium witnessed during the latter part of '90s as the underlying growth rate of the advertising market is likely to be lower. She maintains her long-term buy rating.


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