Block-To-Block: Wall Street Reduces Outlook For Madison Avenue

Citing "massive layoffs" at Omnicom and reduced client budget expectations at Interpublic, one of Wall Street's last big securities firms lowered its 2009 outlook for America's last two big agency holding companies.

Citing plans for upwards of a 5% reduction in Omnicom's 70,000-person global workforce, Deutsche Bank analyst Matt Chesler reduced his target price for Omnicom's stock nearly 13% to $28 a share, noting, "A reduction of this magnitude indicates to us that Omnicom did not achieve the right balance in headcount to accommodate lower growth than they had expected at the beginning of the quarter."

He noted that WPP had previously acknowledged as much, and said that the job reduction by Omnicom, suggests that advertising trends are getting worse in a hurry, and that their outlook for '09 growth is much lower now."

Chesler took the target price of Interpublic's stock down even more significantly, reducing it nearly 17% to $5 a share, and citing the continually weakening outlook for client spending in 2009.

"There is a big question mark beside their ability to maintain this positive momentum in 2009 given the soft ad environment," he wrote.



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