Can Shares In WPP PLC Outperform Vodafone Group plc, BT Group plc, SKY PLC And ITV plc After Results?

Are shares in WPP PLC ORD 10P (LON:WPP) (LSE:WPP.L) a stronger investment than shares in Vodafone Group plc (LON:VOD) (LSE:VOD.L), BT Group plc (LON:BT.A) (LSE:BT.A.L), SKY PLC (LON:SKY) (LSE:SKY.L) and ITV plc (LON:ITV) (LSE:ITV.L)?


Shares in WPP PLC (LON:WPP) (LSE:WPP.L) have fallen 5.9% at the time of writing following its 2016 results release to investors. It was another record year for WPP, with strong forex gains in H2. Investors may be encouraged by reported billings moving 16% higher to £55.245 billion, up 5.5% in constant forex and 3.3% on a LFL basis. Reported revenue was 17.6% higher at £14.389 billion, which includes the positive effect of forex movements.

WPP achieved LFL revenue growth in all regions, led by strong growth in Western Continental Europe, Asia Pacific Latin America, Africa & the Middle East and Central & Eastern Europe. It also registered growth in all sectors except for data investment management. It experienced particularly strong growth in advertising and media investment management, branding and identity, healthcare and specialist communications.

The company’s headline PBIT increased 21.8% to £2.160 billion. This is the first time it has been higher than £2 billion and it obviously benefitted from forex movements.  Headline diluted earnings per share increased 20.9% to 113.2p, which was 7.7% up in constant forex. This reflects margin improvement, the effect of investment in acquisitions and strong LFL revenue growth.

Looking ahead to 2017, WPP seems to have adopted a more cautious outlook. Given continued uncertainty on economic growth and recent weaker comparative net new business trends, it has set revenue and net sales growth budgets at 2% for 2017 on a LFL basis. In my view, this is a possible reason why the company’s shares are down 5.9% so far today. However, WPP is targeting a headline operating margin improvement on net sales of 0.3 margin points at constant forex.

In the last year, shares in WPP have risen 17% while other TMT shares have fallen. Vodafone Group plc (LON:VOD) (LSE:VOD.L), BT Group plc (LON:BT.A) (LSE:BT.A.L), SKY PLC (LON:SKY) (LSE:SKY.L) and ITV plc (LON:ITV) (LSE:ITV.L) are all down in the last year. For example, BT’s shares are 30% lower, Vodafone’s share price is 8% down, SKY is 3% lower and ITV’s shares have slumped 11%.

In my view, WPP’s shares have investment appeal. I think it has a good strategy and will continue to perform well on a relative basis. I believe it has a strong management team and the finances to invest in more acquisitions. Therefore, while I think ITV and Vodafone could perform well, I’m upbeat about WPP’s potential on a relative basis within the TMT sector.

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