Morgan Stanley Downgrades Agency Stock Across-the-Board

31 July 2002

The increasingly discredited band of Wall Street entrail-rakers continue to prognosticate about the future performance of companies that create rather than manipulate wealth – on this occasion the four global advertising holding companies.

The latest of the bookies to lay odds is investment bank Morgan Stanley, which on Monday lowered its grading of the big four ad shops – WPP Group, Interpublic Group, Omnicom and Publicis Groupe. Previously deemed ‘attractive’ buys, the quartet are now rated ‘in line’ with stocks in general.

Analyst Michael Russell’s assessment, he explained, is based on an “increasingly uncertain economic climate [which] could reduce new-product introductions and new-win potential even further.” Such prescience disproves the widespread belief that analysts look no further ahead than lunchtime.

On an individual basis, Morgan Stanley lowered Interpublic’s rating from ‘overweight’ (which in banker-speak means the stock’s total return is expected to exceed the industry average) to ‘equal weight’. At the same time, MS reiterated its view that Omnicom – despite recent concerns about its $394 million (€400.74m; £252.22m) earn-out liabilities – remains ‘overweight’.

And lest these esoteric judgements seem slightly at odds with the real world, Russell explained why he had singled out Interpublic for the Mafioso kiss: “Revenue growth appears to be even more murky than we thought,” he opined. Whereas this year Omnicom has been “relatively strong” on the new-business front.

For those who prefer to plan their investment on a more numerate basis, the reporting season is nigh: Omnicom and Interpublic are due to reveal Q2 results next week; Publicis Groupe on August 12; and WPP on August 20.

Data sourced from:; additional content by WARC staff