WPP: What We Think of the Stock After Earnings

Key Morningstar Metrics for WPP

• Fair Value Estimate
  : GBX 308
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : None
• Morningstar Uncertainty Rating
  : High

What We Thought of WPP’s Earnings

WPP WPP delivered better than expected first-half results, with like-for-like net sales down 4.7%, ahead of management’s guidance, while cost cuts lifted headline operating margin to 8.4%. Stronger net new business wins improve the setup for 2027, but underlying revenue trends remain weak.

Why it matters: WPP is showing early signs of stabilization but little evidence yet that its competitive position has materially improved. Recent wins could support a return to growth in 2027, though the company continues to materially lag a healthy advertising market.

• WPP has recently improved its net new-business performance with wins including Estée Lauder, JLR, Airbnb, and Honda. While encouraging, Omnicom has described the current new-business environment to be “as brutal as it’s ever been” and acknowledged competitive pricing in recent pitch losses, raising the likelihood that WPP’s wins come at weaker economics.
• Cost savings are cushioning profitability but cannot drive a durable turnaround alone. With second-half investment increasing, longer-term margin expansion increasingly depends on restoring revenue growth and improving operating leverage.

The bottom line: We maintain our no-moat rating and fair value estimate of GBX 308 for WPP. Shares were up nearly 30% after earnings on improving net new business momentum and sequential organic trends. We think the reaction runs ahead of the fundamentals and need to see recent wins translate into sustained growth and stronger profitability before revisiting our valuation.

• Current results still reflect prior client losses, while forward indicators have only recently improved. With management not expecting a return to growth until 2027, the turnaround remains early.