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3 Top Stocks From the Recuperating Advertisement Industry

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Economic recovery leading to rise in manufacturing and service activities, along with increased digital marketing services and success of the work-from-home trend, is enabling the Zacks Advertising and Marketing industry to counter the prevailing pandemic-induced challenges. Remarkably, customer-centric approaches to business, digital strategies and cost-management initiatives are helping Gannett Co., Inc. (GCI - Free Report) , The Interpublic Group of Companies, Inc. (IPG - Free Report) and WPP plc (WPP - 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 (OMC - Free Report) . The pandemic will continue to change the way industry players have conducted businesses and delivered services so far. The key focus within the industry is currently on channelizing money and efforts toward media formats and devices. Service providers are increasing their efforts toward formulating and reassessing strategic initiatives, identifying sources of demand and targeti

What's Shaping the Future of the Advertising Industry?

The Delta Variant Increasing Concerns: The industry’s revenues, income and cash flow have declined substantially over the past year due to the pandemic-induced reduction of social events and stringent gathering restrictions. With the delta variant spreading and the pandemic signaling a stay for a long haul, the industry is expected to remain under pressure in the days to come.

Economic Recovery to Offset Some Pressure: Although a recovering economy, and manufacturing and non-manufacturing strength is likely to partially offset continued weakness in advertising spend, 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 projected to reach $278.5 billion by 2024, marking more than a 100% surge from the $132.5 billion registered in 2019.

Zacks Industry Rank Indicates Bright Prospects

The Zacks Advertising and Marketing industry, which is housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #96. This rank places it in the top 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 solid near-term growth prospects. 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.

Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock market 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 43.1% compared with the S&P 500 composite’s rally of 33.7% and the broader sector’s 18.3% decline.

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 13.61 compared with the S&P 500’s 21.61 and the sector’s 30.19.

Over the past five years, the industry has traded as high as 16.75X, as low as 9.15X, and at the median of 12.63X, as the charts below show.

Price to Forward 12 Month P/E Ratio

3 Advertising Stocks to Consider

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

 

Gannett: This media and marketing solutions company is focused 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 EPS has been revised more than 100% upward over the past 60 days. The stock has surged a whopping 254% in a year’s time.

Price and Consensus: GCI

The Interpublic Group of Companies: With a flexible business model in place, this global provider of advertising and marketing services 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 been revised 14.6% upward in the past 60 days. The stock has appreciated 99.6% over the past year.

Price and Consensus: IPG

WPP: The company is a provider of communications, commerce, and technology services. Its operating performance and service executions have been robust through the pandemic. Adoption of the work-from-home model, continued assignment wins and cost-saving initiatives are helping WPP sail through these testing times.

The Zacks Consensus Estimate for the current-year EPS has moved 6.4% north in 60 days’ time. Shares of the company have rallied 67.9% in the past year.

Price and Consensus: WPP