WPP Earnings: Revenue Growth Continues to Underperform Peers; Lowering Our Fair Value Estimate

Narrow-moat WPP Group reported less-than-stellar results for its first quarter. We are lowering our fair value estimate to GBX 940 per share from GBX 1,010 as we account for a higher probability that the company comes in at the very low end of its growth targets and struggles to meet its medium-term goal of 3%-5% growth. Our revised fair value estimate is still roughly 15% above the current price as of this writing. We do not think the valuation is demanding, but we believe WPP will have to prove that it can at least keep up with peers on revenue growth before its valuation gap with peers begins to close.