On Nov, 11, we maintained our Neutral recommendation on
). While the advertising company's long-term fundamentals appear
solid, we remain sidelined due to its soft top-line performance
in the recent quarters.
Moreover, concentration risks, foreign currency exposure and
stiff competition from other players in the market could
undermine its profitability to some extent.
Why the Reiteration?
On Oct 23, WPP reported revenue growth of 7.4% year over year
to £2,680 million ($4,152.4 million) for third quarter ended Sep
30, 2013. However, it missed the Zacks Consensus Estimate of
Nevertheless, the company won net new business of $3.716
billion during the third quarter of 2013, compared with $1.415
billion in the prior-year quarter.
The company reported decent revenue growth in three of its
four reporting segment namely -
Branding and Identity, Healthcare and Specialist
Communications, Advertising and Media Investment
. However, revenues from the
Public Relations & Public Affairs
segment rose marginally.
Moreover, acquisitions have been the company's primary tool
for strengthening its foothold in new and emerging markets.
During the first nine months of 2013, WPP completed 45
acquisitions. These strategic acquisitions give the company a
major competitive edge and enhance its creative reputation and
co-operation among the Group companies.
However, WPP's dependence on a limited number of big clients
for a significant portion of its revenues is a cause for concern.
Loss of any of these clients could adversely impact its
prospects, business, financial condition and operational results.
Moreover, the company's international operations are exposed to
economic uncertainties and risks from local legislation and
unstable political conditions.
Other Stocks to Look For
Currently, WPP holds a Zacks Rank #2 (Buy).
Some other stocks that are performing well in the advertising
industry and carry the same Zacks Rank include
Marin Software Inc.
Publicis Groupe SA
). Another peer in the Business Services sector,
ABM Industries Inc.
) holding a Zacks Rank #2 (Buy), can also be considered.
ABM INDUSTRIES (ABM): Free Stock Analysis
MARIN SOFTWARE (MRIN): Free Stock Analysis
PUBLICIS GP-ADR (PUBGY): Get Free Report
WPP PLC (WPPGY): Free Stock Analysis Report
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