Profit Progress Almost all the publicly owned ad companies posted profit gains in the first quarter. Even Young & Rubicam, public now but private during the year’s first three months, saw its net income rise. CKS Group took another step backward, as management had cautioned. Analysts are estimating that the company’s earnings per share will show flat comparisons for the current quarter, but start gaining in the periods beyond. Elsewhere, the outlook is for the good times to roll on. At most shops, margins are close to their historic highs; the gains in profits, therefore, must come more from higher revenues or acquisitions, not cost savings. On the other hand, Y&R and WPP Group both have room to play margin catch-up, so they may see above-average profit growth over the balance of the year. And for the companies relying on revenue gains to fatten profits, the outlook for global ad growth remains rosy almost everywhere but Asia this year, so profit progress is likely. Unfortunately, there’s a tendency for companies to get sloppy and ease up on cost controls after a couple years of prosperity – sometimes just as revenue growth begins to slacken. Profit and stock-price slides are the usual consequences. – Alan Gottesman (westendal pobox.com) is principal of West End Consulting.
THE GOTTESMAN FILE
Ad-company earnings per share generally rose in the first period. Analysts are calling for continued gains.
Source: West End Research. Earnings in cents per share.
*Data for quarter ended nearest to March 31.