WPP Group reported solid second-quarter results, providing further evidence of the broad-based recovery in ad spending. While some media sectors--for example, newspapers--are facing secular declines and may never return to revenue growth, we expect most advertising-dependent companies to generate positive revenue growth throughout 2010. Revenue of £2.4 billion was up 9% from the prior-year quarter on a reported basis. Adjusting for currency effects and acquisitions, internal revenue growth was 5%, comparable to our full-year forecast. The operating margin through the first half of 2010 was 7.7%, slightly below our 9.2% forecast for the year. However, thanks to increased promotional and advertising spending during the holidays, the fourth quarter is the most profitable quarter for marketing companies, which should push margins higher in the second half of 2010.
For more Morningstar commentary on the advertising industry, read our recent stock strategist report Is Advertising Growth Becoming a Tough Sell?
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