Interpublic Group reported a sharper-than-expected drop in quarterly results, sending its shares down 11 percent and making it clear that the advertising industry's troubles are not yet over.
While Interpublic Chief Executive Michael Roth said conversations with advertising and media clients suggested that the worst is behind us, the picture he painted was in no way one of a quick recovery.
Clients continue to be cautious when it comes to committing resources in such an uncertain environment, Roth said.
Interpublic, which counts General Motors as one of its largest clients, showed the impact of the deep advertising recession in second-quarter results, with earnings dropping to $20.9 million, or 4 cents a share, down from $88.1 million, or 17 cents a share, a year earlier.
Revenue for Interpublic, parent to well-known agencies like DraftFCB and McCann-Erickson, fell by a sharper-than-expected 19.7 percent to $1.47 billion.
Analysts had expected earnings of 10 cents a share on revenue of $1.6 billion.
Interpublic reported a 14.5 percent drop in organic revenue, a closely watched industry benchmark that excludes the impact of foreign currency and recent acquisitions. It said part of that drop was due to declines in spending from the auto sector and on events marketing.
So far this year, organic revenue at Interpublic is down 10.5 percent, slightly worse than U.S. rival Omnicom Group , whose organic revenue is down about 8.8 percent.
CEO Roth said organic revenue should be consistent in the second half of the year, but that cost savings from job cuts and other measures should help. In the past nine months, Interpublic has cut about 4,100 jobs, or 9 percent of its workforce.
The cost savings, Roth said, should leave it in a position
to significantly improve its profit alongside an economic and advertising recovery -- one that cannot come soon enough for the advertising industry.
Other top advertising executives, like Omnicom's John Wren and Publicis' Maurice Levy, have also said the worst appears to be behind the industry. While pointing to 2010, both executives noted in their earnings calls last week that any recovery in ad spending would likely be modest rather than explosive.
Shares of Interpublic have risen by around 60 percent this year, largely on hopes of an advertising recovery. They lost some ground on Tuesday, dropping 69 cents to $5.50 on the New York Stock Exchange.
(Reporting by Paul Thomasch and Yinka Adegoke; Editing by Lisa Von Ahn, Derek Caney and Matthew Lewis)