Publicis Earnings: Once Again Demonstrates the Success of Its Power of One Strategy

Thanks to account wins and continuing growth in consulting and data analytics, Publicis PUB posted strong third-quarter net revenue and increased its full-year organic growth guidance. While the firm has unquestionably outperformed its peers year to date, we think these results also support our assumption of no recession in the U.S. and continuing growth in overall ad spending this year. However, regarding its peer, WPP, we do not expect results as strong as Publicis given some notable account losses by WPP, which could offset the impact of its account wins.

We’re increasing our fair value estimate of Publicis to EUR 80 from EUR 79 on a slightly increased full-year organic growth assumption. While the stock is trading at a discount, we recommend a wider margin of safety for this narrow-moat name.

Although consulting services grew slightly, they still faced increasing headwinds from many clients’ large digital transformation project delays. The firm’s clients’ continuing focus on first-party data in our view drove not only the double-digit organic growth in data analytics but also the high-single-digit organic increase in media net revenue. Creativity net revenue increased at a single-digit rate organically even with increasing usage of artificial intelligence, which many think could replace most of creativity.