WPP hits six-month high on renewed TV ad optimism, Goldman tips ITV
16-02-2018 15:07
WPP shares have rallied to a six-month high amid a recent improvement in the ad market, capped off by a bullish view given by analysts at Goldman Sachs and Numis on Friday.
"Recent advertising trends have been better than expected across the board," says Goldman in a note to clients, though its top pick in the sector was ITV, based on an attractive price multiple of 10x 2019 earnings despite improving advertising/audience share momentum and M&A potential.
Goldman expects 2017 ad figure to emerge showing a "more positive note in most TV markets", based on analysts' conversations with industry participants, read-across from recent results and comments from large advertisers.
A "slightly more positive" outlook is seen for 2018, weighted towards the first half of the year, helped by easy comparatives compared to last year's slow start, and sports events.
The structural outlook still varies to a great degree by market, analysts say, with viewing and pricing trends "key".
On TV ad trends, Goldman said these "have decoupled more meaningfully from macro indicators over the last year, exacerbating structural concerns over the outlook for TV".
Previewing WPP's final results on 1 March, broker Numis forecast profit before tax of of £2.09bn and earnings per share of 118p, with the consensus forecast for £2.195m and 120p respectively.
Other global marketing communications groups have already reported and Numis characterises the tone as "cautiously optimistic", with IPG particularly upbeat, and both IPG and Omnicom guiding to organic revenue growth of 2-3% for 2018.
"After a challenging 2017, we would not be surprised if WPP guided very cautiously at its finals and then raised guidance as it progressed through the year. The group gave a robust defence of its business model at the Q3 results, when it indicated that consultancies and Facebook/Google were not structurally challenging its business, but that 2017 was disappointing due to the major CPG clients reducing spend."
