Media News

UPDATE 2-Publicis raises growth target for 2010

* Q3 revs up 9.2% at 1.32 bln eur, vs fcast 7% to 1.25 bln

* Economic recovery boosts ad market across all regions

* Raises organic growth target to about 6 pct vs 3.5 pct

* Shares up 3.8 pct vs 0.4 pct sector rise

(Adds share reaction, analyst)

By Leila Abboud

PARIS, Oct 21 (Reuters) - Advertising group Publicis PUBP.PA nearly doubled its organic growth forecast for the year to around 6 percent after a broad recovery in ad markets lifted its third-quarter figures above forecasts.

Maurice Levy, chief executive of the world’s third-largest ad group, said the economic recovery would continue to boost the ad sector next year, despite concerns over employment and government austerity measures.

“We expect the global ad market to grow at about the same pace next year as we have seen this year, or roughly 4.6-4.7 percent,” he said.

“The indications we have for next year is that the situation in the U.S. and Europe is improving, and that emerging markets will continue to provide most of the growth.”

Publicis shares were up 3.8 percent at 37.11 euros per share at 1134 GMT, while the media index .SXMP was up 0.4 percent.

Publicis shares have outperformed this year, increasing by 25 percent, while peers are up 10 percent.

Levy also said that Publicis, which competes with Omnicom OMC.N, WPP WPP.L and Havas EURC.PA, would grow faster than the overall global ad market in 2011, 2012 and 2013, helped by its strategy of focusing on digital ads and emerging markets.

Levy’s upbeat comments came as Publicis posted organic growth of 9.2 percent to reach revenue of 1.32 billion euros ($1.82 billion) in the third quarter, beating expectations of 7 percent growth and revenue of 1.25 billion in a Reuters poll of nine analysts.

Its growth rate in the third quarter beat rivals Havas and Omnicom, which posted 5.3 and 5.5 percent revenue growth, respectively. [ID:nLDE69H1RZ] [ID:nPnNY84143]

WPP results are due on Oct. 29.

For Publicis, North America was particularly strong, with 12 percent revenue growth and new contracts signed with Sony for its Playstation campaign and with tax preparer H&R Block.

In Europe, Publicis saw a strong recovery in the third quarter in France and the UK, with 12.6 percent and 9.3 percent growth, respectively, while Germany and southern Europe remained more difficult.

Levy said the market should not expect as strong a performance in the fourth quarter as in the third, given the typical uncertainty surrounding ad budgets at the end of the year and difficult comparisons with last year.

“We are quite confident that we will outperform the market this year,” he said, adding that analysts were calling for the market to grow around 4.8 percent this year.

He said Publicis would have organic growth of “around 6 percent” this year, raising his previous prediction of growth of 3.5 percent or higher.

Levy did not alter his goal to reach an operating margin of above 15 percent, which would be on a par with 2009, despite the negative impact of integrating its acquisition of U.S.-based digital agency Razorfish and a higher wage bill as bonuses came back and hiring and salary freezes were lifted.

“We should be reasonably higher than 15 percent,” he said of the margin target, but declined to be more specific.

Analysts remain divided as to whether there is still potential upside on the company’s shares.

Citigroup analyst Thomas Singlehurst said the results would “be a strong boost to sentiment but may not affect consensus numbers” and cited the weakening dollar as a potential drag on profits in the coming months.

He added that Publicis’s P/E ratio of 13.5 was already higher than the sector average of 12: “We don’t see scope for significant upside and stick with our neutral view.”

CM-CIC analyst Emmanuel Chevalier wrote in a note that Publicis shares could still go higher, and has a “buy” rating and a price target of 40 euros. “Publicis has confirmed the relevance of its strategy with this publication and its strong execution skills,” he wrote. (Editing by James Regan and Will Waterman) ($1=.7264 Euro)