UBS Downgrades Organic Rev Growth For Omnicom, IPG

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Citing "global macro concerns" about the economy, Wall Street financial firm UBS lowered its 2012 organic revenue growth and profit estimates for two of advertising's major holding companies: Omnicom and Interpublic Group.

The move follows UBS' action earlier in the week, reducing its estimate on U.S. ad spending growth next year to 3.6% from 4%.

That downgrade was preceded recently by a number of others, including Barclays, which earlier this month downgraded its 2012 U.S. ad spend growth estimate to 4% from 5.2%. For this year, Barclays is predicting growth of just 1.4% for the U.S. Earlier it predicted an increase of nearly 3%.

Indeed, U.S. spending growth slowed from the first quarter to the second quarter, according to Kantar Media. Second-quarter spending was up just 2.8% compared to the same period in 2010. By comparison, year-to-year growth in the first quarter was up 4.4%.

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When Kantar released its second-quarter ad spending figures on Sept. 12, Jon Swallen, the firm's senior vice president of research, stated that the slower rate of growth raised questions "about the durability of an advertising recovery that is into its second year."

Swallen said that key indicators are "painting a mixed picture. On one hand, a majority of media types actually improved their performance from Q1 to Q2. On the other, spending growth for the top 100 advertisers stalled in Q2, and the ad market became more dependent on the comparatively smaller budgets of mid-sized advertisers as the main source of growth."

For Interpublic, UBS said it was reducing its organic growth estimate from 5% to 3.6% for next year and lowering the holding company's estimated profit (before interest and taxes) to $725 million from $758 million. That equates to a profit margin drop of three-tenths of a percent to 10%, UBS said.

For Omnicom, UBS is reducing its 2012 organic growth estimate from 5% to 4.3%. The financial firm is also knocking $40 million off its estimated 2012 pre-tax and-interest profit estimate to $1.84 billion. That would drop the company's margin two-tenths of a point to 12.6%, the UBS report stated.

No comments from Omnicom or IPG on the UBS report. While it reduced its performance forecast for the companies, UBS did not downgrade its stock recommendations for either firm. It maintained its "buy" rating for IPG and its "neutral" rating for Omnicom.

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