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.