Young & Rubicam Soars on News the Firm Is Joining the S&P 500

Y&R is replacing General Instrument, which is being acquired by Motorola, after close of trading next Wednesday.
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Young & Rubicam

(YNR)

shot up 8 1/4, or 13%, to 70 13/16 in early morning trading Thursday on

news that the ad agency will be added to the

S&P 500

. (Y&R ended up 7 5/8, or 12%, to 70 3/16.)

Y&R will replace

General Instrument

(GIC)

, which is being acquired by

Motorola

(MOT)

, after the close of trading next Wednesday. (General Instrument closed up 1 1/8, or 1%, to 84 1/2, while Motorola finished up 2 1/4, or 2%, to 147 7/8.)

"It is a little bit of a graduation" for Y&R, one of the largest ad agencies in the world, said Kevin Gruneich, who covers the industry for

Bear Stearns

, which led Y&R's initial public offering in May 1998. "It gives the company recognition as one of the major corporations in the country."

Y&R's ascension from IPO to part of the S&P 500 in little more than a year-and-a-half is "significantly faster" than most, Gruneich added.

The company joins ad giants

Omnicom Group

(OMC) - Get Report

and

Interpublic Group of Cos.

(IPG) - Get Report

on the index. And joining the S&P caps off what has been an excellent year for the company; its stock has appreciated 93% since the beginning of the year, Gruneich said, compared with 73% for Omnicom and 37% for IPG. Despite those gains, Y&R, with a market cap of roughly $5 billion, still lags far behind its larger competitors; Omnicom clocks in at nearly $18 billion and IPG at more than $15 billion. (Omnicom ended down 7/8, or 1%, to 99 11/16. IPG finished up 11/16, or 1%, to 55 1/8.)

Gruneich rates Y&R a buy.