Broker snap: Investec turns cautious about WPP after Q2 disappointment

30th Aug 2012 10:07

Investec has placed its 'buy' recommendation and target price for Sir Martin Sorrell's media giant WPP under review after the group scaled back its full-year guidance as second-quarter results came in below expectations.First-half sales totalled £4,972m, up 5% year-on-year but below Investec's forecast of £5,006m, with like-for-like (LFL) growth of 3.6% short of the +4% estimate. Investec says that his implies second-quarter LFL growth was just 3.2%."Slower Q2 LFL sales growth and reduced expectations for FY growth - disappointing so expect some share price pressure given possible consensus downgrades," said analyst Steven Liechti.The broker reckons that consensus earnings per share (EPS) downgrades of around 2% are likely in 2012 (-1/5% in 2013) on the back of the reduction in full-year LFL sales target and some foreign exchange pressure.Investec said that WPP's shares have re-rated on the back of better macro sentiment recently and so they would need positive sentiment or a catalyst to run further. The key risks to the stock are third-quarter momentum and macro growth sentiment/delivery, the broker added.By 10:06 on Thursday, shares were down 2.95% at 807p.BC