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Advertising & Marketing Outlook Bright Despite Coronavirus Scare
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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 (IPG - Free Report) and Omnicom (OMC - Free Report) .
Here are the industry’s three major themes:
The industry is mature and revenues and cash flows remain stable through the economic cycle. This enables industry players to pay out stable dividends.
Amid coronavirus outbreak, digital media consumption has risen with consumers spending more time indoor on various media platforms and streaming video services. So, agencies offering digital marketing stand to gain as they are better positioned to address this rapid change in customer preference. According to Magna’s most recent global ad forecast, U.S. linear and digital ad revenues are anticipated to grow 6.6% this year.
The pandemic is expected to result in sluggish economic growth due to slowdown in both manufacturing and non manufacturing activities. Ad spending and consequently demand for services is likely to take a temporary hit.
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 #18. This rank places it in the top 7% 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 Lags S&P 500 & Sector
Over the past year, the Zacks Advertising And Marketing industry has underperformed the Zacks S&P 500 composite and the broader sector.
While the industry declined 31%, the broader sector and the Zacks S&P 500 composite were down 2.8% and 3.1% respectively.
One-Year Price Performance
Industry’s Current Valuation
On the basis of 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 7.39 compared with the S&P 500’s 15.74 and the sector’s 21.
Over the past five years, the industry has traded as high as 17.89X, as low as 7.39X and at the median of 13.22X, as the charts below show.
Forward 12-Month Price-to-Earnings
Bottom Line
Significant rise in digital media consumption should be able to somewhat offset the coronavirus led impact on the industry. Agencies are most likely to revamp their offerings to make most of the rising demand for linear and digital advertisement.
Here are a few stocks from the industry that you may want to consider as thesehave a favorable Zacks Rank and have been witnessing upward estimate revisions.
National CineMedia (NCMI - Free Report) carries a Zacks Rank #2. The consensus estimate for its 2020 earnings has increased 6.7% in the past 60 days.
Price and Consensus: NCMI
Omnicom Group carries a Zacks Rank #2. The Zacks Consensus Estimate for the company’s 2020 earnings hasincreased 1.6% in the past 60 days.
Price and Consensus: OMC
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
Image: Bigstock
Advertising & Marketing Outlook Bright Despite Coronavirus Scare
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 (IPG - Free Report) and Omnicom (OMC - Free Report) .
Here are the industry’s three major themes:
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 #18. This rank places it in the top 7% 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 Lags S&P 500 & Sector
Over the past year, the Zacks Advertising And Marketing industry has underperformed the Zacks S&P 500 composite and the broader sector.
While the industry declined 31%, the broader sector and the Zacks S&P 500 composite were down 2.8% and 3.1% respectively.
One-Year Price Performance
Industry’s Current Valuation
On the basis of 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 7.39 compared with the S&P 500’s 15.74 and the sector’s 21.
Over the past five years, the industry has traded as high as 17.89X, as low as 7.39X and at the median of 13.22X, as the charts below show.
Forward 12-Month Price-to-Earnings
Bottom Line
Significant rise in digital media consumption should be able to somewhat offset the coronavirus led impact on the industry. Agencies are most likely to revamp their offerings to make most of the rising demand for linear and digital advertisement.
Here are a few stocks from the industry that you may want to consider as thesehave a favorable Zacks Rank and have been witnessing upward estimate revisions.
The Interpublic Group of Companies carries a Zacks Rank #2 (Buy), The Zacks Consensus Estimate for the company’s 2020 earnings has risen1.5% in the past 60 days. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: IPG
National CineMedia (NCMI - Free Report) carries a Zacks Rank #2. The consensus estimate for its 2020 earnings has increased 6.7% in the past 60 days.
Price and Consensus: NCMI
Omnicom Group carries a Zacks Rank #2. The Zacks Consensus Estimate for the company’s 2020 earnings hasincreased 1.6% in the past 60 days.
Price and Consensus: OMC
Today's Best Stocks from Zacks
Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%.
This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year.
See their latest picks free >>