Even with the pressure from new U.S. tariffs affecting consumer spending, Citi is optimistic about the U.S. advertising sector, highlighting the forthcoming merger between Omnicom and Interpublic as a strong long-term investment opportunity.

Short-Term Impact from Tariffs

Citi analysts acknowledged a decline in advertising spend due to tariff pressures:

• Estimated to be 6% lower in 2025 than previously predicted.

• Forecast to drop by 5% in 2026.

This has led to a 3% reduction in revenue forecasts for both Omnicom (NYSE: OMC) and Interpublic (NYSE: IPG):

• Forecast for Omnicom’s organic growth stands at +1% for 2025.

• Interpublic is expecting -3.5% organic growth in 2025.

These projections fall short of both company guidance and consensus estimates.

Reasons for Citi’s Continued Optimism

Despite short-term challenges, Citi has reinitiated coverage with Buy ratings for both advertising giants due to multiple factors:



• Significant Undervaluation

  • Pro forma for the merger, Omnicom-IPG is trading at only 9x 2026 EPS, a valuation last seen during the 2008 financial crisis.

  • Citi estimates EPS of $8.26 in 2026, rising to $9.42 in 2027, buoyed by anticipated cost synergies of $750 million.

• Global Reach

  • A large portion of revenues is sourced from international markets, lessening the impact of domestic tariff struggles.

• Post-Merger Opportunities

  • The combined company will wield enhanced scale, advanced technology stacks, and improved digital capabilities.

  • These enhancements will better position them to navigate the challenging advertising landscape.

“The pro forma business will be even more capable of serving clients than either individual firm,”

Valuation Projections

• Omnicom (OMC): Price target set at $103

• Interpublic (IPG): Target price of $35 (based on anticipated merger outcomes).

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Key Data Sources for Insights

• Bulk Ratings API
  Monitor changes in analyst ratings and sentiments post-coverage initiation.

• Company Rating API
  Observe shifts in overall company performance and fundamentals following the merger.

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Conclusion

Despite a dim outlook for U.S. advertising expenditure, Citi identifies the Omnicom-Interpublic merger as an attractive long-term investment. Investors with a medium-to-long-term perspective may still find opportunities due to the expected benefits from global exposure, operational efficiencies, and trends favoring digitalization.