Art & Commerce




Profit Profile Most of the big publicly owned ad companies have reported their results for last year, and the news is good. All scored double-digit percentage gains in revenue in the fourth quarter, and profit margins were either flat with last year’s or up. Some are feeling the slowdown in Asian economies, but the continued strength in the U.S., plus a pickup in Continental Europe, has, so far, more than offset that. Investors have been heartened by the profit performance. Margins, a measure of how efficiently a company can turn a dollar of revenue into a penny of profit, are also flat to up. In this industry, investors ordinarily value a share of stock according to how much net income is underneath it, using earnings per share as the measure. Here, too, the news is uniformly good, with increases from all companies. Interestingly, the ills that befell some of the new-age players–Eagle River, CKS and Leap–did not infect any of the majors; nor did investors become concerned that the flurry of mergers–True North with Bozell, for one–will lead to problems down the road. Most of the stocks are trading at or near their all-time highs. –Alan Gottesman (westendal pobox.com) is principal of West End Consulting.

THE GOTTESMAN FILE
For the most part, ad stocks grew in 1997.

……….Interpublic…..Omnicom…..True North…..WPP Group
…..’96 revenue…..$788…..$752…..$290…..$1,368
…..’97 revenue…..$993…..$895…..$343…..$1,505
…..Change…..26%…..19%…..18%…..10%
…..’96 pretax margin…..17%…..13%…..10%…..11%
…..’97 pretax margin…..17%…..19%…..13%…..11%
…..’96 EPS…..0.62…..0.37…..0.57…..1.25
…..’97 EPS…..0.71…..0.45…..0.59…..1.46
…..Change…..15%…..22%…..4%…..17%

Source: Company records. Dollars in millions, except for share. EPS = earnings per share. WPP data cover six months.