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3 Advertising Stocks Poised to Escape Pandemic-Led Industry Weakness

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The coronavirus pandemic-induced economic weakness has affected advertisement spends across many industries. Reductions in social events and gathering restrictions have significantly dampened service demand, making the scenario dull for the Zacks Advertising and Marketing Industry.

Remarkably, customer-centric approaches to business, digital strategies and cost-management initiatives are helping Gannett Co., Inc. (GCI - Free Report) , Omnicom Group Inc. (OMC - Free Report) and The Interpublic Group of Companies, Inc. (IPG - Free Report) to sail through these testing times.

About the Industry

The Zacks Advertising and Marketing industry comprises companies that offer a range of services, including advertising, branding, content marketing, digital/direct marketing, digital transformation, financial/corporate business-to-business advertising, graphic arts/digital imaging, healthcare marketing and communications, and in-store design services.

Prominent players from the industry include The Interpublic Group of Companies and Omnicom.

What’s Shaping the Future of the Advertising Industry?

Gathering Restrictions to Stay: The industry’s revenues, income and cash flow have declined substantially over the past year due to the pandemic-led reduction of social events and stringent gathering restrictions. With the virus signaling a stay for a long haul, the industry is expected to remain under pressure in the days to come.

Weak Advertising Spend: The pandemic has resulted in an economic slowdown and there has been a significant drop in advertising spending across the world. Demand for marketing and advertising services, especially in the travel and retail sectors, will take a longer time to revive.

Digital Marketing Gathering Steam: Amid the crisis, digital media consumption has shot up, with consumers spending more time indoors on various media platforms and streaming video services. Thus, agencies offering digital marketing services stand to gain, as these firms are better positioned to address this rapid change in customer preference. According to Statista, Digital advertising spending in the United States is expected to reach around 153 billion by 2024, marking a substantial rise from the $132.46 billion registered in 2019.

Zacks Industry Rank Indicates Gloomy Prospects

The Zacks Advertising And Marketing industry, which is housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #158. This rank places it in the bottom 38% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates underperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

Despite the gloomy prospects, we present a few stocks that you may want to consider for your portfolio. But before that it’s worth taking a look at the industry’s performance and current valuation.

Industry Outpaces S&P 500 & Sector

Over the past year, the Zacks Advertising And Marketing industry has outperformed the S&P 500 composite and the broader sector.

The industry has appreciated 69.1% compared with the S&P 500 composite’s rally of 51.1% and  the broader sector’s 16.5%.

One-Year Price Performance

 

Industry’s Current Valuation

On the basis of the forward 12-month price-to-earnings (P/E) ratio, which is commonly used for valuing advertising and marketing stocks, the industry is currently trading at 14.15 compared with the S&P 500’s 22.9 and the sector’s 29.72.

Over the past five years, the industry has traded as high as 16.51X, as low as 9.15X, and at the median of 12.63X, as the charts below show.

Forward 12-month Price-to-Earnings (P/E)

 

3 Advertising Stocks to Consider

We present three stocks that currently carry a Zacks Rank #2 (Buy) or a Zacks Rank #3 (Hold) and are well positioned for near-term growth. You can see the complete list of today’s Zacks #1 Rank stocks here.

Gannett: This media and marketing solutions company currently carries a Zacks Rank of 2.

The company is focusing on long-term subscription-led digital growth strategy with a view to change from a traditional print media business to a digitally-focused content platform. The strategy aims at fueling digital subscriber growth, growing digital marketing services, optimizing traditional businesses across print circulation and advertising, investing in businesses that promise growth, and building an inclusive and diverse culture that emphasize individual growth and customer focus.

The Zacks Consensus Estimate for 2021 has been revised 71.4% upward in the past 60 days. The stock has surged a whopping 454% over the past year.

Price and Consensus: GCI

Omnicom: This provider of advertising, marketing, and corporate communications services also carries a Zacks Rank #2, at present.

Consistency and diversity of operations, and focus on delivering consumer-centric strategic business solutions ensure long-term profitability for the company. Omnicom has divested underperforming and non-core businesses, and reorganized to meet clients’ ever-transforming needs.

The Zacks Consensus Estimate for the ongoing year’s EPS has been revised 4.5% upward in the past 60 days. The stock has surged 36.7% over the past year.

Price and Consensus: OMC

The Interpublic Group of Companies: This global provider of advertising and marketing services carries a Zacks Rank of 3, currently.

With a flexible business model in place, the company has been focusing on its strategic priorities, promptly investing in talent and offerings, and managing operating costs amid the pandemic.

The Zacks Consensus Estimate for the ongoing-year EPS has moved 2.6% north in the past 60 days. The stock has appreciated 91.3% over the past six months.

Price and Consensus: IPG

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In-Depth Zacks Research for the Tickers Above


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Omnicom Group Inc. (OMC) - free report >>

Interpublic Group of Companies, Inc. The (IPG) - free report >>

Gannett Co., Inc. (GCI) - free report >>