Investec says 'add' WPP after third quarter trading update

WPP’s shares declined on Monday on the back of third quarter like-for-like sales missing analysts’ estimates, but Investec issued the advertising giant an ‘add’ rating, citing growth in digital and emerging markets.

In a note to investors, Investec analyst Steve Liechti said while the third quarter was “not as good as hoped”, it kept its full-year guidance unchanged for like-for-like 3% growth.

“We like the growth shift to digital/emerging markets (EM) and cash generation, but see some unhelpful near-term global GDP uncertainty," he wrote, citing EM macro economics and foreign exchange effects.

Forecasts were not expected to change materially apart from tweaks to geographic assumptions given third quarter trends, better expected EM in the fourth quarter and softer fourth quarter group comparatives.”

WPP reported revenues for the three months to 30 September were up 5.9% to £2.93bn, however at a constant exchange rate the company’s revenue rose 7.9%. Like-for-like net sales rose 3.3%, stronger than 2.3% in the first half, driven by particularly strong growth in advertising and media investment management as well as direct, digital and interactive and specialist communications.

WPP said that while its forecasts are characteristically cautious, it expects revenue and net sales in the fourth quarter will show higher growth than the first nine months.

Shares fell 1.82% to 1,453p at 0952 GMT.