An analyst’s report has cut WPP’s profit forecast for 2010 by around 32%, predicting that marketing companies will take longer to recover from the economic crisis.
The Collins Stewart report has downgraded the global advertising and marketing company’s forecast earnings by 15% in 2009 and by as much as 32% in 2010, compared to current consensus figures.
It said that “agencies’ recovery is likely to lag [behind] other media sub-sectors, as they have done in the past”.
“Last downturn WPP’s revenue growth lagged [behind] global ad growth recovery, WPP in particular was held back by PR,” it added.
Collins Stewart suggests that agencies’ share price performance typically takes longer to recover from an downturn, compared with the stocks recovery from newspapers.
The report based its forecasts on the impact on WPP and the agency sector in the 2001 and 2003 downturn.
“We do not think this necessarily represents a worst-case scenario, the ad downturn of 2001 to 2003 was relatively mild in GDP terms. This time around GDP declines could drive greater falls in ad growth,” the report added.
WPP’s chief executive, Sir Martin Sorrell, recently said: “The next 15 months are not going to be easy.”
Speaking at a Nabs event last month, Sorrell said he had predicted that 2009 would be a tough period a number of years ago and warned that the economic crisis surrounding the financial markets is unlikely to improve until 2010.
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