WPP Earnings: Revenue Growth Outlook Worsens; Lowering Our Fair Value Estimate

Narrow-moat WPP Group muddled through its second quarter as management lowered its full-year revenue growth outlook. We are lowering our fair value estimate to GBX 820/USD 52 per share from GBX 940/USD 59 as we account for the lowered near-term growth outlook and a less optimistic longer-term margin profile. We continue to forecast that the company will struggle to meet its medium-term goal of 3%-5% growth. Our revised fair value estimate is still roughly 17% above the current price at the time of writing. We do not think the valuation is demanding. Still, we believe WPP will have to prove that it can at least keep up with peers on revenue growth and start seeing some of its restructuring efforts pay off with improved margins before its valuation gap with peers begins to close.