Onward at Omnicom

By Mara Der Hovanesian

In January, when General Electric (GE ) scratched its 23-year-old slogan, "We bring good things to life," it earmarked $100 million for a new image and looked to Omnicom Group's BBDO Worldwide. As the No. 3 world ad shop, Omnicom (OMC ) serves the blue chips, among them Gillette (G ) , Campbell Soup (CPB ), and DaimlerChrysler (DCX ). But lately, investors have been downbeat on Omnicom's prospects.

Last summer, in the face of accounting woes and the resignation of its audit committee chairman, the stock got chopped in half in just weeks. That prompted Moody's to review the debt, rattling investors. "Everyone assumed Moody's was taking it down to a D," says Jim Huguet of the Great Cos. America Fund, which then loaded up at 40 a share. Huguet's accountants found Omnicom in fine shape. He says the discounted value of its free cash flow is $92 a share--where he thinks the now-57 stock should be trading. Moody's still has the bonds on "watch."

Meanwhile, Omnicom is gaining share, hauling in a steady stream of fees--rather than the usual ad-biz commissions. Mark Greenberg, manager of the $1 billion Invesco Leisure Fund, pegs its free cash flow at $4.25 a share and forecasts 2003 profits of $3.80. That's up from First Call's consensus of $3.71 for this year, and from last year's $3.42. He sees the stock at 90 in a year. "Look, if the economy collapses, everybody gets hit," he says, of his No. 3 holding. "But I have a hard time thinking Omnicom's growth won't outpace the market." There's more: Berkshire Hathaway's Warren Buffett reported in November he recently added 500,000 shares via his Geiko insurance unit.

Gene Marcial is on vacation.

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