On the heels of strong results reported by Omnicom (OMC), Interpublic Group (IPG) and WPP (WPP) both reported accelerating revenue growth in the third quarter; we're sticking with our fair value estimates of 670p for WPP.
Interpublic's year-over-year internal revenue growth accelerated to 9.4% in the quarter (8.5% growth in the second quarter; negative 2.9% in the first quarter) thanks to growth in most geographies, Europe being the notable exception. The operating margin improved to 6.4% from 4.1% a year ago and is in line with our full-year forecast.
WPP's year-over-year internal revenue growth accelerated to 7.5% in the quarter (4.9% growth in the second quarter; flat growth in the first quarter). In contrast to Interpublic's results, WPP's business in Europe actually grew but remained well below the growth rates of other areas of the world; Omnicom similarly reported weak revenue growth in Europe. The weakness in Europe across all three firms is probably a reflection of the slow-recovering economy there.
The largest marketing service conglomerates across the globe--Omnicom, Interpublic, WPP, Publicis Groupe (PUB), and Havas (HAV)--have all reported accelerating revenue growth for the past five quarters. While we expect growth to subside as year-over-year comparisons become more difficult, we think these results indicate a sustained recovery in ad spending and bode well for other media companies, except those exposed to industries facing secular decline, like newspapers.