BUZZ-Ad agencies: paying the cyclical penalty

** Ad agencies have suffered from a move away from cyclicals - but share price falls have far outpaced EPS downgrades.

** WPP (LSE: WPP.L - news) and Publicis (Paris: FR0000130577 - news) both down 15-20 pct YTD a reminder of a past when investors viewed ad agencies as very cyclical businesses, say JP Morgan.

** Market focusing too heavily on weak organic revenue growth, which is becoming more difficult to compare across the sector, rather than EPS growth, bank adds.

** Mirabaud points out share price fall of 18 pct from its January peak significantly outstrips EPS downgrade of 7 pct over the same period.

** Fall takes WPP forward P/E to 12.5, below 10-year median. Chart: http://link.reuters.com/jud33w

** At 13.5 fwd P/E, Publicis also now below 10-year median.

** " is not yet compelling, but worth keeping an eye upon," says Mirabaud's Steve Clayton.

** Near-term read across positive: US peer Onmicom reported strong Q3 numbers on Tuesday, seeing WPP close up 4 pct and Publicis up 3 pct.

** share price performance: http://link.reuters.com/gud33w

** Publicis reports Q3 earnings on Thursday, WPP on Oct. 31. (RM (LSE: RM.L - news) : alasdair.pal.thomsonreuters.com@reuters.net)