Advertising agencies had a bruising second quarter, with the industry as a whole struggling to grow and WPP PLC (LSE:WPP) delivering the weakest numbers.
UBS expects a modest recovery when the sector reports next month, but it has little faith that the London-listed ad and marketing giant will lead the way.
The broker is sticking with a 'sell' recommendation on the London-listed group.
It forecasts net revenue to fall 4.8% in the third quarter, an improvement on the second but still firmly in decline.
The business has been hit by client losses at the start of the year, including Coca-Cola and Kimberly-Clark, with Mars expected to follow in the final quarter.
UBS has also trimmed its margin forecasts for 2025 to 13.5%, 150 basis points lower than 2024, reflecting weaker growth.
That makes Cindy Rose’s first outing as chief executive on WPP’s earnings call one to watch.
Investors will be keen to hear how she intends to steady the ship, though UBS warns that any announcements could prompt short-term cuts to profit forecasts, even if they eventually help to restore growth.
The sector as a whole is expected to return to growth in the third quarter, albeit barely. UBS sees organic growth of 0.6% year on year, helped by better performance at WPP and Interpublic.
That is a step up from the flat showing in the second quarter, but still some distance from the 2–3% growth rates achieved last year.
Among peers, Publicis is in a stronger position. The French group surprised the market with a resilient second quarter and has guided for a slowdown in the second half, but UBS notes there is little sign of this yet. That opens the door to another upgrade.
The broker reiterates its 'buy' rating, pointing to momentum in its media arm and steady progress in creative work, even if Sapient remains a drag.
Omnicom also retains a 'buy' call. UBS thinks earnings for the enlarged business, once its merger with Interpublic completes, could be more than $11 a share by 2027.
On that basis, the stock is trading on less than seven times earnings, a rating the analysts argue is too low if the combined company delivers even modest growth.
For the industry, the coming quarter should mark the end of a rough patch. For WPP, it looks like only the beginning of a difficult rebuild.