Latest results for the advertising giant pushed shares up after they hit six year low in February.
WPP gives investors hope the group’s turnaround is on track
- Shares rise 7% in early trading, giving investors hope the company is on the road to recovery.
- Results beat market expectations, with rising revenues and a lower fall in like for like sales.
- With unprecedented levels of uncertainty for the company and sector, we recommend the shares as a medium to high risk ‘Hold’.
The results this morning from the advertising and PR juggernaut have led to a 7% rise in the share price, giving long suffering investor’s hopes the company is now firmly on the road to recovery and easing fears after recent sector and market weakness.
There was a reported 1.6% rise in revenue to £7.62bn and a 2% fall in like for like sales, which was above expectations. The all-important guidance for the full year was maintained, with expectations for sales to fall by 1.5% to 2%. The CEO highlighted that the second quarter was slightly ahead of expectations with net sales down by 1.4%. Mr Read was however quick to reiterate they are still in the early stages of a three year turnaround plan which involves restructuring measures such as simplifying its structure, cutting costs, selling off parts of the business and a greater focus on technology. Some of which has already come to fruition, helping the group win new work from clients such as eBay, Instagram and L’Oreal.
The shares, which hit a six year low in February, could look attractive to value seekers, but the CEO’s comment that a “return to growth in the US will take some time” could temper enthusiasm . The big question is whether the group can return to consistent revenue growth.
Our view on WPP - Hold
With so much uncertainty surrounding the company and the sector it operates in, we suggest a medium to higher risk ‘Hold’ recommendation for the patient.
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