Aegis Group (LSE:AGS)
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Advertising agencies are expected to report yet another good quarter of organic revenue growth, finishing the year on a high and confirming the recovery in the industry, and giving an upbeat outlook for 2011.

Following a stronger-than-expected recovery in ad spend during the first nine months of the year, driven mainly by a buoyant U.S. market, fourth quarter organic revenue growth at most agencies is, however, likely to slow slightly from the previous quarter due to tougher comparisons.

Advertising executives are expected to give an upbeat outlook for 2011. Most advertisers, forecasters and analysts now agree that 2011 will be another solid year for the industry, although not quite as strong as 2010. On average, industry experts expect global ad spending to grow 4% to 5%, but some are more upbeat. Goldman Sachs recently raised its forecast for agencies' organic revenue growth by one percentage point to 6.5% to take into account positive indications on U.S. spending and a more positive macroeconomic outlook.

With strong revenue growth widely expected, the key focus will shift to margins. All of the agencies are investing to reintroduce bonuses and boost staff levels, notably to recruit new talent in digital and expand in emerging markets and some analysts are concerned that this may inflate costs more than initially expected and thus weigh on margins.

Close attention will also be paid to agencies' objectives for cash usage and potential dividend increases.

WPP PLC (WPP.LN) and Publicis Groupe SA (PUB.FR) remain the favored stocks in the sector for many analysts due to their large exposure to emerging markets and digital activities but also due to expectations of increased payouts to shareholders.

Meanwhile, analysts have been encouraged by improving momentum at Aegis Group PLC (AGS.LN), buoyed by the group's increasing exposure to the Asia-Pacific region.

--- Publicis Groupe SA (PUB.FR)--- (Feb. 10)

MARKET EXPECTATIONS: Kicking off the earnings season for the European agencies, Publicis is expected to confirm the recent ad industry recovery, with potential for a positive surprise on organic revenue growth. Publicis has targeted organic revenue growth of around 6% in 2010, but analysts say the group is likely to beat this number. Chief Executive Maurice Levy is expected to remain upbeat about the market for next year and will likely reiterate the group's target to outperform market growth. Still, the potential for good news on margins is more limited.

MAIN FOCUS: The key focus for the fourth quarter will be on the group's margin and margin prospects for 2011 and beyond. Publicis has said it aims to post a full-year operating margin higher than the 15% posted last year, but analysts worry that the margin improvement may slightly disappoint amid higher staff costs and the integration of recently acquired digital agency Razorfish. Comments on plans for what the company aims to do with its cash and any potential increase in the dividend will be a focus. A commitment to higher shareholder returns could prove a positive catalyst for the shares.

--- WPP PLC (WPP.LN) --- (March 4)

MARKET EXPECTATIONS: WPP, the world's largest advertising group by revenue and market capitalization, is expected to post robust fourth quarter revenue growth, driven in particular by its high exposure to emerging markets and the strong U.S. ad recovery. Some analysts say WPP could also surprise the market positively on top line growth in 2011. WPP has so far said it expects organic revenue growth of between 3% and 4% in 2011. It also said it is likely to exceed its 2010 margin target of one margin point improvement and that its 2011 margin should improve by at least half a margin point.

MAIN FOCUS: The market will be keen to hear CEO Martin Sorrell's outlook for 2011 and comments on staff costs. Analysts are also interested in hearing more about the group's plans for shareholder remuneration after Sorrell in October hinted that WPP is leaning towards higher dividends over share buybacks. He said the group will continue to make small to medium-sized acquisitions but not significantly more than it has done over the past two years.

---Aegis Group PLC (AGS.LN) --- (March 17)

MARKET EXPECTATIONS: The U.K.-based advertising and marketing firm is also expected to post strong fourth quarter organic revenue, but the company already cautioned that the rate of growth is expected to slow from the third quarter. Management is expected to remain positive about prospects for 2011 after CEO Jerry Buhlmann in November said there were increasingly positive signals from its clients regarding their short-term advertising expenditure plans.

MAIN FOCUS: In addition to outlook and comments on margins, analysts are keen to get an update on the group's recent acquisition of Australia's Mitchell Communication Group Ltd and some believe the group could give a better-than-expected synergy target, potentially lifting the share price on the day. The acquisition of Mitchell, the group's first large deal for some time, has boosted Aegis's exposure to the Asia-Pacific region, which should help the group post organic revenue growth at the top end of its peer group in 2011, according to Nomura.

--Havas SA (HAV.FR) --- (TBC)

MARKET EXPECTATIONS: Havas is expected to post good fourth-quarter organic revenue growth, benefiting notably from recent new business wins, after it suffered large account losses in France and the U.S. in 2009. Analysts don't expect much detail on outlook for 2011 as the group lately has been very shy in communicating guidance. Chairman and main shareholder Vincent Bollore has said he expects continued revenue growth in the second half.

MAIN FOCUS: The key focus will be on the margin as analysts are keen to find out if the group still has potential to increase its margin further, following a period of cost optimization which has seen Havas catch up with peers in terms of margin. The market is also keen to hear more about plans for M&A given that the group now has financial leeway and has said it would like to expand its presence in emerging markets and digital. Eyes will also be on the dividend as many analysts believe higher shareholder returns look increasingly likely.

-By Ruth Bender, Dow Jones Newswires; +33 1 40 17 17 54; ruth.bender@dowjones.com