As WPP updates the market with its third quarter results Ian Forrest, Investment Research Analyst at The Share Centre, explains what it means for investors.
WPP beats market expectations with Q3 results
- Year to date revenues down 1.1% to £7.9bn, but Q3 beat expectations as they rose 0.7%, the shares rose 5% in early trading as market welcomes this morning’s results
- Good growth seen in Europe, UK and India while North American market also improvement despite a drop in revenue
- Group maintains full year forecast, including 1.5% - 2.0% fall in full-year revenue, but the trend is certainly encouraging
- With profit margins and earnings under pressure The Share Centre maintains its ‘Hold’ recommendation for patient investors
Global advertising giant WPP has had a tough few years but there were some signs in today’s third quarter figures that the recent restructuring efforts are beginning to pay off. Revenues in the year-to-date is down 1.1% to £7.9bn but in the third quarter itself they rose 0.7%, which was better than the market expected. There was good growth in Europe, the UK and a number of emerging markets including India. There was a big improvement in the company’s main North American market although it still saw a drop in revenue. WPP maintained its full-year forecasts, which include a 1.5-2.0% fall in full-year revenue, but the trend is certainly encouraging.
The market welcomed the figures sending the shares up 5% in early trading. WPP is clearly facing some competitive challenges, not just from its traditional rivals but from disruptors in the tech sector such as Google and Facebook. However, the steady improvement in North America is clearly positive for investors as are the actions taken in recent months to simplify the company’s structure and improve its balance sheet. The dividend yield of 6.2% is clearly appealing but with profit margins and earnings still under pressure we still see the shares as no better than a ‘Hold’ for patient investors willing to accept a medium-to-higher level of risk.
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