WPP’s Performance: Investments Banks Contradict Each Other

20 February 2003

The fatuity of investment banks’ production line prognostications was highlighted Wednesday when the London offices of two leading US entrail-rakers issued contradictory assessments of the current performance and prospects for agency titan WPP Group.

In the blue corner, Morgan Stanley: in the red corner, Lehman Brothers. The former gave WPP the thumbs-up, the latter pointed south.

Morgan Stanley announced it had raised its stock rating for WPP from “under weight” to “equal weight”, retaining its share price target at £3.80 ($6.08; €5.65). Said analyst Matthew Owen: “Our valuation recognises concerns over euro advertising weakness raised by French agencies.”

[Both Havas and Publicis raised this issue last week when presnting their results for 2002, although Owen appears to have missed the point that their concerns relate to the strength of the euro, not its weakness].

Lehman, on the other hand, cut its anticipated value for WPP shares for the year ahead by £0.30 to £5.20 per share - but curiously decided to stand by its “equal weight” stock rating.

All of which is largely irrelevant, as WPP is due to release its 2002 full year results on Monday and word from within suggests that Sir Martin Sorrell will deliver a pre-tax profit of around £392 million (£0.241 per share) – an operating margin of 12.1%.

Sir Martin is also expected to deliver an upbeat assessment of prospects for 2003, albeit based on improving margins than revenues. He has repeatedly stated that he sees no prospect of sustainable global recovery until 2004.

Meantime, in the ivory towers of London EC2, the debate continues as to the number of angels that can be accommodated on the head of a pin.

Data sourced from: Telegraph.co.uk; additional content by WARC staff