(Bloomberg) -- WPP Plc shares fell after the advertising group raised its sales outlook less than some investors were anticipating following upgrades at its rivals. 

While the company raised its outlook for the year and beat analysts’ estimates for organic growth, the “magnitude” of the beat and unchanged margin guidance “could be seen by the market as a slight disappointment,” analysts at Goldman Sachs Group Inc. said in a note on Friday. 

WPP’s results followed reports from Publicis Groupe SA and Omnicom Group Inc., which both raised guidance. Large advertising agencies have shown themselves to be resilient to higher inflation and slower growth so far. WPP said that demand is still robust, particularly from clients in the technology and health-care industries, with the exception of the Chinese market where lockdowns have hurt its sales outlook for the year. 

“We’re moving into a more uncertain economic environment. There’s no doubt about that,” Chief Executive Officer Mark Read said in an interview on Friday. “I think we’re going into that in a strong position.” 

WPP’s adjusted sales will rise 6% to 7% this year, the London-based group said in a statement on Friday. That compared to its previous forecast of 5.5% to 6.5%. The company adjusts its revenue numbers to exclude pass-through costs, fees that are passed on to clients from external suppliers. 

Key Insights

  • Adjusted sales excluding pass-through-costs rose more than 12% to 5.5 billion pounds ($6.7 billion) in the first half of the year.
  • In the medium term, WPP said it is “confident” in its ability to increase revenue excluding pass-through costs of 3% to 4%.
  • WPP raised its interim dividend by 20% to 15 pence and said that it’s completed £637 million of its £800 million buyback program.
  • The company said it won business from brands including Audi, Audible, Danone and Nationwide in the second quarter and said it’s ramping up work with Coca-Cola. WPP won a role as Coca-Cola’s global marketing network partner in 2021 to help overhaul the soft-drink giant’s marketing strategy.
  • Demand for data and technology-led projects could help WPP overcome client pullback from traditional ad campaigns in the second half of the year, Bloomberg Industry analyst Matthew Bloxham has said.
  • Rivals have been resilient so far. also raised its sales growth forecast.
  • WPP acquired Latin American e-commerce agency Corebiz last month without disclosing terms. It also bought Australian marketing technology services agency Bower House Digital in June. The company also bought Village Marketing, a creator economy business, in the first half.

Market Context

  • WPP fell 6.8% to 832.20 pence at 8:23 a.m. on Friday, after earlier dropping as much as 7.1%, the biggest intraday decline since May.
  • Shares have dropped about 20% this year through Thursday.
  • WPP Slides as Growth, Margin Lag High Expectations: Street Wrap

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