UPDATE 1-Agency.com tops Q3 sales, cash earnings forecasts

(Adds context, analyst comment, edits throughout)

By Daniel Sorid

NEW YORK, Oct 25 (Reuters) - Internet consulting firm Agency.com on Wednesday posted third-quarter revenues and cash earnings per share that topped Wall Street estimates, even as other industry companies showed signs of stagnation.

Internet consultants help companies devise strategies for bringing their business online. But when dot-com stock prices plunged earlier this year, Wall Street questioned whether many of the consultants could thrive, or even survive.

While many of their share prices have fallen sharply since then, some are seeing additional drops as third-quarter financial results further disappoint investors.

Internet consultant MarchFirst Inc. lost more than half its value after reporting disappointing operating earnings on Tuesday. MarchFirst shares closed on Wednesday at $4-3/16, down 11/16 for the day. Its high for the year was $81-1/8.

Razorfish Inc. shares fell more than 11 percent, or 5/8, to $4-11/16 on Thursday, a day after reporting its results.

But Agency.com seems to have found a formula for generating revenues even during a period when the word ".com" in a company name can be the equivalent of a Scarlet Letter, analysts said.

Agency is showing growth "in a difficult period when many other companies are not making sequential (revenue) growth," Prudential Securities analyst James Dougherty said. "Which says they're getting business that some of their competitors are not getting."

For Agency.com, cash earnings per share, the figure many analysts consider most important for the company, were 7 cents in the quarter, a penny above consensus analyst estimates tracked by First Call/Thomson Financial. Agency reported a pro forma cash loss per share of 13 cents in the third quarter of 1999.

Revenue grew 14 percent over the second quarter to just over $57.3 million. That also beat analyst expectations of $56.4 million. Net earnings per share were nil, compared to a net pro forma loss of 25 cents in the third quarter of 1999.

Agency.com's chief financial officer, Charlie Dickson, said in an interview the company expects revenues to grow 50 percent in the year 2001. He also said the company plans to reach operating margins of 15 to 20 percent over the next 18 months, compared to 8.2 percent in the third quarter.

Agency.com shares closed down 1/2 to $11-5/8 on the Nasdaq Exchange, having fallen sharply over the year from its 52-week high of $98.