Barclays on U.S. Media: Initiation of US Advertising Agencies IPG & OMC
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Rating Summary:
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Today's Overall Ratings:
Up: 6 | Down: 5 | New: 12
Rating Summary:
11 Buy, 14 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 6 | Down: 5 | New: 12
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Barclays on U.S. Media: Initiation of US Advertising Agencies
Barclays analyst, Anthony J. DiClemente, said, "We are initiating coverage of the US ad agencies with a Overweight rating on Interpublic Group (NYSE: IPG) and a Equalweight rating on Omnicom (NYSE: OMC). This now rounds out our global coverage of the agencies, with Barclays Capital European Media Analyst Julien Roch's coverage of AGS, HAV, PUB, and WPP (Nasdaq: WPPGY). Our top two picks in the space are IPG and WPP, and we see greater upside potential at IPG. Overall, we believe that the agencies have become more valuable in an increasingly fragmented, complicated, and "nationalized" media landscape and that tailwinds from digital and emerging markets offer structural growth in an environment where cyclical growth may be hard to come by. On a company-specific level, we prefer IPG over OMC owing to greater margin upside potential and more attractive valuation."
"Tweaking US ad forecast; headline numbers unchanged. We have also updated our US ad forecast for 2Q11 actuals and fine-tuned our estimates. Our estimates for total US advertising growth of 1.4% in 2011 and 4.0% in 2012 (including political and the Olympics) remain unchanged and are below our economics team's US nominal GDP estimates of 4.0% and 5.0%, respectively."
Other highlighted points include: 1) "Digital" is more friend than foe to agencies; 2) Global companies with considerable international/emerging markets exposure. ~20-25% of IPG's and OMC's revenue come from outside the US and Europe; 3) 3) Lower margin volatility is attractive in choppy environment. We believe that the stocks can work in a low-growth scenario given their variable cost structure; and 4) Valuation reasonable relative to Media; prefer IPG over OMC.
Barclays analyst, Anthony J. DiClemente, said, "We are initiating coverage of the US ad agencies with a Overweight rating on Interpublic Group (NYSE: IPG) and a Equalweight rating on Omnicom (NYSE: OMC). This now rounds out our global coverage of the agencies, with Barclays Capital European Media Analyst Julien Roch's coverage of AGS, HAV, PUB, and WPP (Nasdaq: WPPGY). Our top two picks in the space are IPG and WPP, and we see greater upside potential at IPG. Overall, we believe that the agencies have become more valuable in an increasingly fragmented, complicated, and "nationalized" media landscape and that tailwinds from digital and emerging markets offer structural growth in an environment where cyclical growth may be hard to come by. On a company-specific level, we prefer IPG over OMC owing to greater margin upside potential and more attractive valuation."
"Tweaking US ad forecast; headline numbers unchanged. We have also updated our US ad forecast for 2Q11 actuals and fine-tuned our estimates. Our estimates for total US advertising growth of 1.4% in 2011 and 4.0% in 2012 (including political and the Olympics) remain unchanged and are below our economics team's US nominal GDP estimates of 4.0% and 5.0%, respectively."
Other highlighted points include: 1) "Digital" is more friend than foe to agencies; 2) Global companies with considerable international/emerging markets exposure. ~20-25% of IPG's and OMC's revenue come from outside the US and Europe; 3) 3) Lower margin volatility is attractive in choppy environment. We believe that the stocks can work in a low-growth scenario given their variable cost structure; and 4) Valuation reasonable relative to Media; prefer IPG over OMC.
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