Last week brought bullish indications for industry recovery, with Omnicom and WPP Group reporting positive results for the third quarter and the U.S. economy surging during the period.
Omnicom's organic revenue, which excludes the impact of acquisitions and currency fluctuations, rose a better-than-expected 5.2 percent, up from 2.6 percent in the first and second quarters. While WPP posted a more modest increase of 1 percent, it was the first time in two years that the company showed a gain in the quarter. (Excluding the Cordiant Communications Group acquisition, organic revenue rose 2 percent.)
"The revenue growth is stronger than expected from both of these blue-chip names and further evidence that the recovery in the ad industry continues to make traction," said Joe Stauff, analyst with SoundView Technology Group in Old Greenwich, Conn.
The U.S, economy grew 7.2 percent in the third quarter, according to the Commerce Department, the strongest showing in nearly two decades. That increase in gross domestic product, boosted by consumer spending and business investment, was more than double the 3.3 percent rate posted in the second quarter.
In a conference call with investors, Omnicom CEO John Wren said the U.S. is showing "early signs of recovery across the board" and that he expects ad spending to continue to increase. Omnicom said net income climbed 7 percent in the third quarter, to $135.3 million, and diluted earnings per share rose 6 percent to 72 cents. Revenue rose 15 percent to $2.03 billion. While global revenue continued to benefit from the weak dollar, U.S. revenue was up 12 percent to $1.11 billion.
WPP, which does not report profit in its quarterly updates, said revenue rose 11 percent to $1.75 billion, boosted by its acquisition of CCG. The London-based holding company said it sees evidence that marketers are switching their focus to top-line revenue growth after three years of cost management.