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Advertisement Spending Likely to Remain Firm in 2023: 5 Picks
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The U.S. economy has recovered impressively from pandemic-related setbacks buoyed by unprecedented fiscal and monetary support. However, the complete devastation of the global supply-chain system and rock-solid demand supported by government stimuli resulted in both cost-push and demand-pull inflation. The inflation rate reached a 40-year high in June 2022.
Consequently, the Fed raised the benchmark interest rate by a massive 4.25% in 2022. Market participants were thinking of a maximum 75 basis point rate hike in 2023. However, an unexpected spike in the inflation rate in January after three consecutive months of decline and several strong economic data have raised concerns that the Fed will continue its rigorous rate hike stance.
A large section of economists and financial experts have warned of a possible recession in 2023. Several U.S. corporate behemoths have already retrenched a big chunk of manpower especially in the high-income segment. The overall earnings of the broad-market S&P 500 Index are expected to be down 9% year over year in first-quarter 2023 after declining 5.6% year over year in fourth-quarter 2022.
Despite the above-mentioned headwinds, several market research agencies have predicted that advertising and marketing spending is likely to remain firm in 2023. Therefore, it should be prudent to invest in stocks with a favorable Zacks Rank in this industry.
Ad Spending to Stay Solid
On Dec 8, 2022, Forbes reported that advertisement spending is likely to increase year over year in 2023 in the United States and globally. However, the rate of increase will be subdued compared to the past two years.
Magna Global anticipates the U.S. ad spending to grow 3.7% in 2023 compared to an estimated 8% in 2022. Forrester projects U.S. ad spending to grow 4.6% in 2023 compared to an estimated 10.2% in 2022. Zenith expects the U.S. advertising spending to grow by $66 billion from 2022 to 2025. The U.S. market will account for nearly 44% of the global ad spending market size.
BIA Advisory Services estimates that the U.S. ad market will total around $165.7 billion in 2023. The absolute figure remains solid despite a 0.5% decline year over year. Finally, Statista forecasts that U.S. digital ad spending will increase by 13.9% year over year to $297.4 billion in 2023.
Our Top Picks
We have narrowed our search to five advertising and marketing stocks that have strong growth potential for 2023. These stocks have seen positive earnings estimate revisions in the last 30 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
The Interpublic Group of Companies Inc.’s (IPG - Free Report) digital capabilities, diverse workforce and geographic reach offer a distinctive competitive advantage. IPG has been acquiring and investing in companies globally, in order to expand its product portfolio and adjust itself with the rapidly changing marketing services and media prospects. IPG has enough cash to meet its current debt. Consistency in dividend payments and share buybacks should boost investor confidence.
The Zacks Rank #1 The Interpublic Group of Companies has an expected earnings growth rate of 2.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.6% over the last 30 days.
Omnicom Group Inc. (OMC - Free Report) continues to focus on its internal development initiatives. Consistency and diversity of operations and increased focus on delivering consumer-centric strategic business solutions ensure persistent profitability.
OMC’s bottom line is gaining from ongoing operating efficiency initiatives in real estate, back-office services, procurement and IT areas. Change in the business mix of OMC resulting from the disposition of some non-core or underperforming agencies has been aiding the bottom line.
The Zacks Rank #1 Omnicom Group has an expected earnings growth rate of 3.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 10.9% over the last 30 days.
WPP plc (WPP - Free Report) is a creative transformation company that provides communications, experience, commerce, and technology services globally. WPP operates through three segments: Global Integrated Agencies, Public Relations, and Specialist Agencies.
WPP offers plans and creates marketing and branding campaigns, designs and produces advertisements across various media, and provides media buying services. WPP also offers public relations advisory services to clients seeking to communicate with a range of stakeholders from consumers to governments and business and financial communities, as well as specialist agency services.
The Zacks Rank #2 WPP has an expected earnings growth rate of 2.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.3% over the last 30 days.
AdTheorent Holding Co. Inc. (ADTH - Free Report) is a programmatic digital advertising company that uses advanced machine learning technology and privacy-forward solutions to deliver measurable value for advertisers and marketers in the United States and Canada.
ADTH offers predictive targeting, geo-intelligence, and cross-environment map solutions and Studio AT. ADTH serves pharmaceutical/healthcare, dining, retail, and travel and hospitality, as well as banking, financial services and insurance industries.
The Zacks Rank #2 AdTheorent has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 62.5% over the last seven days.
Stagwell Inc. (STGW - Free Report) provides digital transformation, performance media and data, consumer insights and strategy, and creativity and communications services. STGW operates through three segments: Integrated Agencies Network, Media Network, and Communications Network. STGW’s brand includes digital transformation and marketing, research and insights, marketing communications and content and media.
The Zacks Rank #2 Stagwell has an expected earnings growth rate of 51.9% for next year. The Zacks Consensus Estimate for next-year earnings has improved 68.5% over the last 30 days.
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Advertisement Spending Likely to Remain Firm in 2023: 5 Picks
The U.S. economy has recovered impressively from pandemic-related setbacks buoyed by unprecedented fiscal and monetary support. However, the complete devastation of the global supply-chain system and rock-solid demand supported by government stimuli resulted in both cost-push and demand-pull inflation. The inflation rate reached a 40-year high in June 2022.
Consequently, the Fed raised the benchmark interest rate by a massive 4.25% in 2022. Market participants were thinking of a maximum 75 basis point rate hike in 2023. However, an unexpected spike in the inflation rate in January after three consecutive months of decline and several strong economic data have raised concerns that the Fed will continue its rigorous rate hike stance.
A large section of economists and financial experts have warned of a possible recession in 2023. Several U.S. corporate behemoths have already retrenched a big chunk of manpower especially in the high-income segment. The overall earnings of the broad-market S&P 500 Index are expected to be down 9% year over year in first-quarter 2023 after declining 5.6% year over year in fourth-quarter 2022.
Despite the above-mentioned headwinds, several market research agencies have predicted that advertising and marketing spending is likely to remain firm in 2023. Therefore, it should be prudent to invest in stocks with a favorable Zacks Rank in this industry.
Ad Spending to Stay Solid
On Dec 8, 2022, Forbes reported that advertisement spending is likely to increase year over year in 2023 in the United States and globally. However, the rate of increase will be subdued compared to the past two years.
Magna Global anticipates the U.S. ad spending to grow 3.7% in 2023 compared to an estimated 8% in 2022. Forrester projects U.S. ad spending to grow 4.6% in 2023 compared to an estimated 10.2% in 2022. Zenith expects the U.S. advertising spending to grow by $66 billion from 2022 to 2025. The U.S. market will account for nearly 44% of the global ad spending market size.
BIA Advisory Services estimates that the U.S. ad market will total around $165.7 billion in 2023. The absolute figure remains solid despite a 0.5% decline year over year. Finally, Statista forecasts that U.S. digital ad spending will increase by 13.9% year over year to $297.4 billion in 2023.
Our Top Picks
We have narrowed our search to five advertising and marketing stocks that have strong growth potential for 2023. These stocks have seen positive earnings estimate revisions in the last 30 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
The Interpublic Group of Companies Inc.’s (IPG - Free Report) digital capabilities, diverse workforce and geographic reach offer a distinctive competitive advantage. IPG has been acquiring and investing in companies globally, in order to expand its product portfolio and adjust itself with the rapidly changing marketing services and media prospects. IPG has enough cash to meet its current debt. Consistency in dividend payments and share buybacks should boost investor confidence.
The Zacks Rank #1 The Interpublic Group of Companies has an expected earnings growth rate of 2.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 2.6% over the last 30 days.
Omnicom Group Inc. (OMC - Free Report) continues to focus on its internal development initiatives. Consistency and diversity of operations and increased focus on delivering consumer-centric strategic business solutions ensure persistent profitability.
OMC’s bottom line is gaining from ongoing operating efficiency initiatives in real estate, back-office services, procurement and IT areas. Change in the business mix of OMC resulting from the disposition of some non-core or underperforming agencies has been aiding the bottom line.
The Zacks Rank #1 Omnicom Group has an expected earnings growth rate of 3.2% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 10.9% over the last 30 days.
WPP plc (WPP - Free Report) is a creative transformation company that provides communications, experience, commerce, and technology services globally. WPP operates through three segments: Global Integrated Agencies, Public Relations, and Specialist Agencies.
WPP offers plans and creates marketing and branding campaigns, designs and produces advertisements across various media, and provides media buying services. WPP also offers public relations advisory services to clients seeking to communicate with a range of stakeholders from consumers to governments and business and financial communities, as well as specialist agency services.
The Zacks Rank #2 WPP has an expected earnings growth rate of 2.5% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.3% over the last 30 days.
AdTheorent Holding Co. Inc. (ADTH - Free Report) is a programmatic digital advertising company that uses advanced machine learning technology and privacy-forward solutions to deliver measurable value for advertisers and marketers in the United States and Canada.
ADTH offers predictive targeting, geo-intelligence, and cross-environment map solutions and Studio AT. ADTH serves pharmaceutical/healthcare, dining, retail, and travel and hospitality, as well as banking, financial services and insurance industries.
The Zacks Rank #2 AdTheorent has an expected earnings growth rate of more than 100% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 62.5% over the last seven days.
Stagwell Inc. (STGW - Free Report) provides digital transformation, performance media and data, consumer insights and strategy, and creativity and communications services. STGW operates through three segments: Integrated Agencies Network, Media Network, and Communications Network. STGW’s brand includes digital transformation and marketing, research and insights, marketing communications and content and media.
The Zacks Rank #2 Stagwell has an expected earnings growth rate of 51.9% for next year. The Zacks Consensus Estimate for next-year earnings has improved 68.5% over the last 30 days.