Global advertising giant WPP PLC (LSE:WPP)’s mediocre interim results came as little surprise to City analysts on Wednesday.
Year-on-year revenues barely budged amid lower contracting marketing spend from WPP’s blue-chip client base and while operating profit improved by 38%, this came at the expense of considerable workforce layoffs.
While broadly unsurprising, these results did highlight WPP’s relative underperformance to its global peers, according to analysts at Shore Capital Markets.
Shore Cap noted that WPP’s like-for-like revenues declined by 1% in the first half, compared to gains of 5.4%, 4.6% and 1.5% at Publicis, Omnicom and Interpublic respectively.
“Although today’s headline results are broadly as suggested by consensus estimates, they highlight WPP’s continued short-term underperformance versus other players – not something that investors have been used to seeing historically,” said Shore Cap analysts.
They continued: “A reduction (albeit slight) in full-year expectations is also disappointing at a time when expectations around a better ad spend backdrop have been building.
“On a more positive tack, the group does appear to be making good progress in pursuing its growth strategy and the sale of FSG Global will further strengthen its financial position and simplify its structure.”
“There were some positives in the release,” agreed UBS analysts, highlighting an incremental bet on first-half EBIT estimates and a second-quarter miss on organic growth that “could have been worse”.
Ultimately this was digging for compliments to give. “With lower guidance on revenue and EBIT margin due to FX, we expect a mid-single-digit decline in consensus 2024 EPS to mean investors respond slightly negatively to the release,” said the bank’s analysts.
Their predictions proved accurate when WPP shares fell 1.6% to 705.6p during Wednesday’s trading session.
UBS has a 'sell' rating on the stock with a 740p 12-month price target.