Broker snap: Nomura hikes target price for WPP

25th Oct 2013 09:34

Nomura has raised its target price for advertising and media giant WPP after a 'reassuringly solid third quarter' and a strong outlook for 2014.The target has been lifted from 1,300p to 1,450p and its 'buy' rating has been retained.The company's results showed that like-for-like (LFL) revenues grew by 5% in the three months to September 30th, a decent acceleration from the 2.4% LFL growth in the first half and ahead of Nomura's estimate for a 4.1% increase.The broker hailed WPP's global performance with "strong growth across several key regions", including the UK, Western Europe and North America. The Rest of World division posted "modest" growth though this was reassuring after the recent weak growth seen in the BRIC region at rival Publicis, it said."In terms of segments, the key takeaway was its market research segment, which has typically held growth back, but on this occasion showed growth of 3.6% (1H13 was up 0.9%) with the division said to be benefiting from the management changes made last year in combination with custom research share gains from Ipsos."Meanwhile, frontman Sir Martin Sorrell guided to further 3.5-4.8% organic growth in 2014 which Nomura labelled as "robust": "We forecast 4% growth and if underperforming areas such as market research continue to show improvement and combining this with 2014 being a mini quadrennial year (World Cup, US mid-term elections and Winter Olympics), we believe organic growth towards the upper end of this if fully attainable."The broker said that the stock is trading at 14.4 times 2014 estimated earnings, a 5% discount to Havas and an 11% discount to Publicis, which is an "attractive entry point".The stock was 0.53% higher at 1,332p on Friday morning, extending gains made on Thursday after its results.BC