WPP (WPP) AI Stock Analysis

215 Followers

Top Page

WPP

(NYSE:WPP)

71Outperform

WPP's overall stock score is driven by its strong financial performance in terms of profitability and cash flow, despite revenue headwinds and high leverage. The stock's technical indicators show short-term strength but potential long-term challenges. Valuation metrics suggest the stock could be undervalued, with an attractive dividend yield. The earnings call presents cautious guidance amid macroeconomic uncertainties, impacting the overall sentiment.

WPP (WPP) vs. S&P 500 (SPY)

Market Cap

$8.63B

Dividend Yield6.33%

Average Volume (3M)336.95K

Price to Earnings (P/E)12.4

Beta (1Y)0.91

Revenue Growth2.07%

EPS Growth407.27%

CountryUS

Employees108,044

SectorCommunication Services

Sector Strength84

IndustryAdvertising Agencies

Share Statistics

EPS (TTM)3.66

Shares Outstanding215,760,470

10 Day Avg. Volume252,977

30 Day Avg. Volume336,953

Financial Highlights & Ratios

PEG Ratio0.07

Price to Book (P/B)1.89

Price to Sales (P/S)0.00

P/FCF Ratio5.31

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$37.00

Price Target Upside-8.35% Downside

Rating ConsensusModerate Sell

Number of Analyst Covering1

WPP Business Overview & Revenue Model

Company DescriptionWPP plc is a multinational communications, advertising, public relations, technology, and commerce holding company headquartered in London, England. As one of the world's largest advertising and marketing services groups, WPP operates across several sectors including advertising, media investment management, data investment management, public relations and public affairs, branding and identity, healthcare communications, and digital, eCommerce, and shopper marketing. The company's core services are designed to help clients grow their businesses by enhancing brand value and reputation through innovative and effective communication strategies.

How the Company Makes MoneyWPP makes money primarily through fees for services provided to clients across its various subsidiaries and brands. The company's revenue model includes several key streams: advertising and media buying, where clients pay WPP for strategic and creative advertising services and media placement; data investment management, which involves collecting and analyzing consumer data to aid client marketing strategies; and public relations, where clients are charged for services that manage and improve their public image. Additionally, WPP generates revenue through branding and identity solutions, digital marketing services, and eCommerce strategies. Significant partnerships with global clients and long-term contracts often contribute to stable earnings. Factors such as industry trends, technological advancements, and client budget allocations significantly influence WPP's revenue.

WPP Financial Statement Overview

Summary

Overall, WPP's financial performance demonstrates improved profitability and cash flow generation, despite a slight decline in revenue. The company has enhanced its operational efficiency as shown by the improved margins. However, high leverage remains a concern, which could pose risks in volatile market conditions. The strong cash flow position provides a cushion, but maintaining revenue growth will be crucial for future stability.

Income Statement

Positive

The income statement shows a mixed performance. The gross profit margin for 2024 was 16.63%, indicating a solid ability to cover production costs. The net profit margin improved to 3.68% from 0.74% in 2023, showing enhanced profitability. However, the revenue growth rate was -0.70%, indicating a slight decline in total revenue relative to the previous year. EBIT margin improved significantly to 8.99% from 3.58% in 2023, suggesting better operational efficiency. EBITDA margin decreased slightly to 10.76% from 12.86% in 2023.

Balance Sheet

Positive

The balance sheet highlights some strengths and challenges. The debt-to-equity ratio increased to 1.83 from 2.04 in 2023, suggesting a high level of leverage, which can be risky. Return on equity (ROE) improved to 15.60% from 3.27% in 2023, indicating better profitability for shareholders. The equity ratio stands at 13.62%, slightly better than the previous year, but still suggests heavy reliance on debt financing.

Cash Flow

Positive

Cash flow statements reveal strong free cash flow growth of 19.41%, indicating improved cash generation capabilities. The operating cash flow to net income ratio was 2.60, demonstrating robust operating cash flow relative to net income. The free cash flow to net income ratio was 2.25, further emphasizing strong cash flow performance compared to earnings.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
14.74B	14.84B	14.43B	12.80B	12.00B
	Gross Profit
2.45B	2.52B	2.54B	2.20B	2.01B
	EBIT
1.32B	531.00M	1.36B	1.23B	2.28B
	EBITDA
1.59B	1.91B	2.03B	1.78B	-1.85B
	Net Income Common Stockholders
542.00M	110.40M	682.70M	637.70M	-2.97B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
2.64B	2.22B	2.49B	3.88B	12.90B
	Total Assets
25.51B	26.62B	28.82B	27.87B	36.17B
	Total Debt
6.35B	6.88B	7.18B	6.83B	15.75B
	Net Debt
4.37B	4.66B	4.69B	2.94B	2.85B
	Total Liabilities
21.77B	22.79B	24.66B	23.80B	31.12B
	Stockholders Equity
3.48B	3.38B	3.68B	3.62B	4.73B
Cash Flow		Free Cash Flow
1.22B	1.02B	477.60M	1.74B	1.78B
	Operating Cash Flow
1.41B	1.24B	700.90M	2.03B	2.05B
	Investing Cash Flow
278.00M	-380.40M	-408.90M	-638.40M	-163.40M
	Financing Cash Flow
-989.00M	-904.70M	-1.91B	-2.06B	-250.50M

WPP Technical Analysis

Technical Analysis Sentiment

Neutral

Last Price40.37

Price Trends

50DMA

38.19

Positive

100DMA

42.62

Negative

200DMA

46.40

Negative

Market Momentum

MACD

0.66

Negative

RSI

58.14

Neutral

STOCH

68.24

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For WPP, the sentiment is Neutral. The current price of 40.37 is above the 20-day moving average (MA) of 38.49, above the 50-day MA of 38.19, and below the 200-day MA of 46.40, indicating a neutral trend. The MACD of 0.66 indicates Negative momentum. The RSI at 58.14 is Neutral, neither overbought nor oversold. The STOCH value of 68.24 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for WPP.

WPP Peers Comparison

Overall Rating

UnderperformOutperform

Sector (60)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
WPP	71 Outperform	$8.63B	12.37	16.04%	6.33%	2.07%	407.27%
IPG	71 Outperform	$9.42B	19.48	13.33%	5.18%	-3.18%	-53.36%
CRTO	69 Neutral	$1.52B	11.59	13.46%	―	-1.18%	100.33%
OMC	69 Neutral	$15.02B	10.53	36.50%	3.64%	5.84%	-1.17%
ZD	68 Neutral	$1.37B	20.37	4.12%	―	3.24%	36.80%
STGW	63 Neutral	$1.42B	1,039.22	0.19%	―	9.86%	―
Sector *	60 Neutral	$14.09B	6.90	-3.35%	3.68%	2.44%	-36.27%

* Communication Services Sector Average

Performance Comparison

WPP

40.37

-10.71

-20.97%

IPG

Interpublic Group of Companies

25.46

-5.15

-16.82%

Ziff Davis

32.84

-23.87

-42.09%

STGW

Stagwell

5.19

-1.84

-26.17%

OMC

Omnicom Group

76.96

-16.34

-17.51%

CRTO

Criteo SA

28.00

-9.24

-24.81%

WPP Earnings Call Summary

Earnings Call Date:Feb 27, 2025

(Q4-2024)

% Change Since: -16.85%|

Next Earnings Date:Aug 01, 2025

Earnings Call Sentiment Neutral

The earnings call highlighted improvements in operating margin, debt reduction, and strategic transformation progress. However, it also acknowledged challenges in net revenue decline, significant issues in the China market, and increased finance costs. The cautious guidance for 2025 reflects ongoing uncertainty in macroeconomic conditions.

Q4-2024 Updates

Positive Updates

Operating Margin Improvement

Headline operating margin improved to 15%, up 40 basis points year-on-year, benefiting from structural cost savings and disciplined cost management.

Debt Reduction

Year-end net debt was reduced to GBP 1.7 billion, a GBP 0.8 billion reduction year-on-year, aided by strong working capital management and the sale of FGS Global.

Strategic Transformation Progress

Significant progress in strategic transformation, including network consolidation, simplification, and investment in WPP Open, AI, and data.

Top Client Growth

Top 10 clients grew by 2.8%, and the top 25 clients grew by 2%, indicating solid client relationship management and growth.

AI and Technology Investment

Increased investment in AI and technology, with WPP Open seeing greater adoption and a planned GBP 50 million incremental cash spend in 2025.

Negative Updates

Net Revenue Decline

Net revenue growth was at minus 1%, at the lower end of the guidance range, impacted by challenging trends in China and weaker discretionary spend.

China Market Challenges

China experienced a 20.8% decline in 2024, with persistent macroeconomic pressures and client assignment losses.

Public Relations and Creative Agencies Decline

Public Relations like-for-like declined by 1.7% and creative agencies saw a 3.9% decline, affected by client assignment losses and challenging environments.

Tech and Interest Cost Increases

Net finance costs increased to GBP 280 million due to higher interest rates from bond refinancing.

Cautious 2025 Guidance

Guidance for 2025 is flat to minus 2% like-for-like, reflecting macroeconomic uncertainty and the impact of net new business.

Company Guidance

In the call, WPP provided guidance for fiscal year 2025 with several key financial metrics and strategic priorities highlighted. The company reported a net revenue decline of 1% for 2024, attributing this to challenges such as an 80 basis point drag from China and reduced discretionary spend in the fourth quarter. Despite these headwinds, they improved their headline operating margin by 40 basis points to 15% and achieved an operating cash flow conversion of 86%. Net debt was reduced by GBP 0.8 billion, ending 2024 at GBP 1.7 billion. For 2025, WPP is guiding to a like-for-like revenue range of flat to minus 2%, with expectations of maintaining flat margins despite a challenging macro environment. The company plans to invest GBP 50 million incrementally in AI and data through WPP Open, aiming to leverage AI for creative and media efficiencies. Additionally, they highlighted recent new business wins and improvements in client retention as pivotal for future growth, while also emphasizing the strategic focus on delivering integrated services and facilitating marketing transformations for clients.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.