UPDATE 2-WPP eyes profit gains after Q3 ad spend uptick

* Q3 like-for-like revenue down 8.7 pct

* Total revenue 2 bln stg

* Says on target for H2 margin target

* Stock up 4 pct, outperforming FTSE 100

(Adds quotes, detail, background, shares)

By Kate Holton

LONDON, Oct 30 (Reuters) - The world's largest advertising group, WPP (WPP.L), expects job cuts and weak comparatives to help boost profits into 2010, after the U.S. market continued to improve and the pace of decline in ad spend slowed.

The group said like-for-like revenues fell 8.7 percent in the third quarter, beating the average analyst forecast in a poll by Reuters and marking an improvement on the 10.5 percent fall reported for the second quarter.

The improvement in U.S. sentiment coupled with comments that group revenue was still expected to be flat in 2010, sent shares in the group up 4 percent, outperforming an otherwise flat FTSE 100.

"People feel better, their hearts and minds are better but it hasn't been reflected in increased spending yet," Chief Executive Martin Sorrell told Reuters. "But it is much less worse in the United States. The down draft is slowing.

WPP's performance also compares favourably to many of its rivals, including Omnicom (OMC.N) and Interpublic Group (IPG.N), which have been hit by the downturn in corporate spending.

WPP, which has cut headcount by 10 percent in the last nine months, said it expected the improvement in trading to continue and result in a flat revenue performance for 2010.

Sorrell told Reuters he expected there to be some positive growth in the first half of 2010 but overall he expects the year to be around flat.

Analysts at UBS welcomed the reassuring update and said they expected the shares to react positively, although they said they were not expecting to change consensus numbers.

"We believe WPP would need to see robust full year revenue growth in 2010 to drive meaningful upgrades -- inline with management guidance of flat growth in 2010, we see this as unlikely with agency revenues likely to lag GDP recovery given fee pressures from contract renewals," they said in a note.

WPP said conditions had eased in July, August and September compared to April, May and June and said they now expected to deliver a flat margin performance in the second half compared to last year.

Reported revenues were 2.01 billion pounds, compared to a Reuters poll forecasting 2.02 billion pounds ($3.32 billion).

The results follow similarly tough trading from other agencies. Omnicom (OMC.N) saw a 10.7 percent decline in the third quarter as key clients cut back on ad spending and Interpublic (IPG.N) posted a 14.2 percent fall. France's Publicis (PUBP.PA) reported organic sales down 7.4 percent. ($1=.6081 Pound) (Reporting by Kate Holton)