WPP Continued Strong Organic Growth in 1H and Increased Full-Year Guidance; Shares Undervalued

While WPP’s first-half results beat the FactSet consensus estimates on the top and bottom lines, and management raised its net revenue growth guidance for the year, the stock declined more than 8% due to expected margin contraction. With the latest U.S. employment numbers casting some doubt over severe economic weakness, we believe demand for WPP’s advertising services will remain strong during the second half of this year. We did not make material changes to our model and are maintaining our GBX 1,340 fair value estimate for WPP. In our view, this narrow-moat name remains attractive.