WPP Lifts Guidance After Ad Sales Jump Past Pre-Covid Levels

(Bloomberg) -- WPP Plc, the world’s largest advertising agency, topped estimates for sales growth and lifted its guidance after companies continued to spend heavily on reaching consumers amid easing lockdowns.  

The London-based group said in a statement that like-for-like revenue minus pass-through costs increased 15.7% in the third quarter compared to a year earlier, at 2.64 billion pounds ($3.63 billion). Analysts had forecast a 9.4% increase.

Amid the surge in spending, WPP lifted its full-year guidance for organic revenue to 11.5% to 12% -- up from a previous forecast of as much as 10% -- with an operating margin “slightly above” 14%. Shares jumped the most since January.

Key Insights 

• “This is more than a cyclical recovery. It points to the longer-term growth opportunities,” Chief Executive Officer Mark Read said in an interview.
• WPP’s third-quarter organic sales topped 2019 levels by 6.9%.
• The company saw its key sales metric climb the most in China, Germany and the U.K. among its top markets, while the U.S. saw like-for-like sales minus pass-through costs rise 12.4%.
• Read said that supply chain turmoil including product shortages hasn’t impacted WPP yet and he doesn’t expect that to change during the upcoming quarter.
• A 600 million-pound share buyback program will be completed in December. WPP plans to continue purchases at a similar rate up through its 2021 preliminary results provisionally set for late February, when it will provide an update for 2022.
• Chief Financial Officer John Rogers told analysts on a conference call it’d be reasonable to assume buybacks would continue into 2022.
• The firm has also been busy deal-making in recent months, with WPP-backed public relations company Finsbury Glover Hering merging with U.S. rival Sard Verbinnen & Co. earlier in October. WPP also purchased artificial intelligence firm Satalia in August and rolled out an augmented reality partnership with Snap Inc. in late September.

Market Reaction

• WPP’s stock has gained 21% this year through Wednesday’s close. It was up 6.1% at 10:41 a.m. in London on Thursday to 1,025 pence per share.
• Citigroup Inc. analyst Thomas Singlehurst writes that WPP’s 3Q organic revenue growth at 15.7% is a “blowout.”

Read More

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