Broker snap: Panmure upgrades WPP price target

4th May 2010 12:16

Panmure Gordon has raised its target price for advertising giant WPP Group though its praise for the group's first quarter performance could not be described as gushing.Panmure Gordon rated the first quarter showing as no more than "reasonable", with the key positives from the update being upgraded margin guidance and the board's confidence on profitability. New net business and the pace of debt reduction so far this year are also encouraging."Q1 [first quarter] net new business has been very solid, c$1.7bn. This is a useful lead indicator of future revenue growth," Panmure analyst Alex DeGroote maintains. "WPP has also clearly been very cash generative YTD [year to date] (average net debt down £389m YTD). On this basis, net debt should ratchet down from c2.8x FY 2009 [fiscal 2009]. In turn, it implies WPP will be more acquisitive (of bolt ons) in coming months," DeGroote adds.The target price has been increased from 600p to 800p. The broker's "buy" recommendation has been maintained.Nomura Securities is also a fan of the stock. It has reiterated its "buy" recommendation" and increased its full year organic revenue growth forecast from 1.2% to 3.0%. The earnings before interest, tax and amortisation (EBITA) margin forecast is nudged up to 13.1% from 13.0% which results in the earnings per share (EPS) forecast for the current year moving up from 52.4p from 53.8p. "Our 2011 EPS forecast goes up from 58.2p to 58.8p," said Nomura analyst Colin Tennant. The price target remains unchanged at 750p.