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Despite solid Q2 25 results (+5.9% OSG, c+800bp vs peers) and FY guidance upgrade (+50bp on OSG), Publicis'' share price declined -6% on the day. This reflects persistent concerns on the Gen AI thematic for the Ad Agencies sector as a whole and potential organic sales slowdown in the second part of the year for Publicis, as implied by company guidance. We continue to think the Gen AI threat is overestimated by investors and see current sector valuation multiples as very attractive. We think Publicis is positioned to beat its guidance and deliver +5.5% OSG in H2 25 and for the FY 25. Given the group''s fundamentals and main peers'' disruption over the coming quarters, we see room for Publicis to maintain significant outperformance relative to peers (350bps on OSG) over the next 3 years. We maintain our O/P rating and EUR130 TP. Solid Q2 25 with growth across all geographies and practices Q2 25 net sales increased +4.6% YoY at EUR3,617m (+1% vs cons.). Solid organic growth (+5.9% vs cons. +4.6%) and MandA contribution (+2.9%) more than offset FX headwinds (c.-4.2%). Sequential acceleration (+5.9% vs +4.9% in Q1) was mostly driven by Sapient. H1 25 adj. EBIT was up +7% YoY at EUR1,242m (in line with cons.). FY 25 guidance upgraded on the back of solid H1 and net new business The group increased its FY 25 organic sales guidance to ''c.+5%'' (vs +4-5% before) while maintaining ''slight margin improvement''. The guidance implies H2 organic sales increasing c. +4.5% vs +5.4% in H1 25. Considering solid underlying momentum, strong net new business and benefits from last year''s bolt-on acquisitions'' entry in the organic sales calculation by Q3 25, we see upside to the c.+5% OSG guidance. Our estimates remain largely unchanged - maintain Outperform A slight increase in our organic sales estimates (+5.5% for the FY vs +5.2% before) is offset by stronger FX headwind on financial expenses.
Publicis Groupe Publicis Groupe SA
With solid net new business, bolt-on MandA strategy benefits (accretive to OSG) and disruption at rivals, we see plenty of opportunities for Publicis to maintain significant outperformance relative to peers (300bp on OSG) over the next 3 years. We are particularly optimistic on recent bolt-on MandA in influencer marketing which could support 50-100bp OSG acceleration by ''26. Better appreciation of the group''s competitive advantages (organization, connected ID, scale in media) and mid-term growth potential (HSD adj. EPS) should support a sustainable re-rating toward c.15x PE. We stay O/P with EUR130 TP (from EUR120). See also our Agencies sector note: Against all odds. Publicis likely to upgrade FY 25 guidance, we see good upside to FY 26 consensus We expect Publicis to increase its FY 25 OSG guidance by 50bp (from +4-5% to +4.5-5.5% OSG) while maintaining its ''slight margin improvement'' objective. This optimism is backed by sustained investment from top marketers, a stronger net new business effect, and robust growth from recent MandA activities (notably Influential). Post-revisions, we model +5.2% OSG for 2025. These growth drivers are expected to continue into 2026, supporting OSG of over 5% (vs. consensus +3.8%). Focus on influencer marketing to support 50-100bp OSG acceleration Influencer marketing is one of the fastest-growing media channels, with c. +30% year-over-year growth. Publicis has gained significant scale in this segment through three recent acquisitions (Influential, Captiv8, BR Media), which generated c.EUR200m in net revenues in 2024. Assuming a +30-40% annual growth rate (industry growth + revenue synergies), influencer marketing services could support c. 50-100 bp of OSG annually over the next three years. Maintain O/P - ests. largely unchanged with higher OSG offset by FX, TP up to EUR130 We upgrade 2025 organic sales ests. to reflect stronger net new business and an influencer boost in H2 25 OSG. This is offset by USD weakening...
Speaker: Arthur Sadoun, Chairman / CEO What we learned: . FY 25 guidance: The low end of the guidance (+4%) remains ''rock solid'' for the FY. The high end (+5%) could be within reach should macro and Sapient momentum improves. Recent new business wins give increased confidence to deliver the guidance. . Outperformance relative to peers likely to be sustained beyond 2025 given best in class capabilities (media, data, commerce, influencer, production, etc...), efficient organization and sustained reinvestment in people and bolt on MandA. . MandA: Management is satisfied with the bolt-on acquisitions made in the past 12 months, including: Influential, Captiv8, Mars United Commerce and Lotame. The group is well-positioned to utilize its 2025 MandA budget (EUR 800-900 million). The group is exploring additional bolt-on opportunities in first-party data, digital media, production, and tech (Sapient). Overall tone: Positive
Publicis delivered solid Q1 25 revenues (+4.9% OSG), helped by the strength of its Connected Media and Intelligent creativity offering. The group reiterated its FY guidance (OSG +4/+5%) as weaker macro momentum should be offset by recent solid new business wins. The release reinforces our view that Publicis is better positioned in absolute and relative to peers to navigate a potential macro slowdown thanks to its differentiated business model, connected ID and efficient organization. We have cut our EPS estimates by c.-3% to reflect FX headwind and slightly lower OSG (4.5% vs +4.9% before). We maintain our O/P rating with a new TP of EUR120 (vs EUR130). Q1 25 helped by the strength of the Connected Media and Intelligent creativity offering Q1 25 OSG came in at +4.9% with softness at Sapient (down mid-single digit) more than offset by solid momentum at Connected Media (up HSD) and Intelligent Creativity (up HSD). New business to offset weaker macro momentum Despite macro uncertainties, Publicis reiterated its FY 25 guidance (OSG +4/+5%, slight margin improvement and EUR1.9/2.0bn FCF before WC changes). Group highlights that several material account wins in the first quarter (Coca-Cola US Media, Abbott Lab US Media, Santander global full service among others) should offset the potential impact of an uncertain macro environment. Given unfavourable FX move since the last update, we expect consensus estimates to be down -2/-3%. Conf call main takeaways (1) Clients are cautious but also combative and have not cut their marketing spending so far, (2) March was the strongest month of Q1. Q2 guidance implies a continuation of the trends seen in Q1, (3) Net new business: Group expects +200bp impact for the FY (+50bp vs previous communication), (4) Sapient: Management is cautious and doesn''t expect a recovery in spending in the near term but neither sees a deterioration vs Q1, (5) Pitch environment: Activity remains high with announced but also unannounced...
Publicis emerged last year as the largest holding co, the ''top dog'' of ad agencies. After a decade of savvy MandA, it is once again set to benefit from industry consolidation - this time from Omnicom''s plans to acquire Interpublic. While the combined OMC/IPG group will take over as the biggest agency, Publicis'' competitive edge (scale, mix, Gen AI) and strong financial position mean it still screens as the Greatest of All Time, aka the GOAT. We believe Publicis is well-equipped to capitalise on opportunities amid the OMC/IPG merger process and navigate US macro uncertainties. Reiterate Outperform and Agencies Top Pick with a new EUR130 TP (40% upside). We see c60% upside in a bull case scenario.
What happened? We hosted 9 Media and Internet companies during day 2 of our inaugural TMT conference. Feedback below BNPP Exane View: Publicis (+) CFO Loris Nold and Deputy CFO Jean-Michel Bonamy Management shared an encouraging message during meetings. Current momentum is challenging and uncertain, but this was already reflected into the FY 25 guidance (+4/+5%) shared early February. Management has not seen any major deterioration over the past few weeks. The low end of the FY 25 guidance (+4%) remains ''rock solid''. Pitch activity remains solid, and management sees a lot of opportunities. OMC/IPG merger create a lot of opportunities on talents and bigger new business win with lower competition on global pitches. Management is very happy with recent MandA (BR Media, Lotame) that strengthens the group on critical and fast-growing segments. UMG (NR): CFO and COO Boyd Muir and Head of Strategy Michael Nash We rate UMG NR Hemnet (+) CEO Jonas Gustafsson and CFO Anders Ornulf We hosted recently appointed Jonas Gustafsson. He sees Hemnet as a strong business with a long runway of growth with the potential to drive innovation and drive closer and more holistic agent relations. The Max launch in April is a major focus, with the Premium tier now well penetrated. Max will offer vendors and agents 1/ more visibility (bigger pics and carrousel) 2/ unique and new email targeting 3/ improved agent branding. Management commentary on price and expected initial uptake were limited. We note Hemnet increased prices across its products in January and is expected to communicate on Max pricing shortly. 2024 ARPL benefited from strong upsell complemented by i) high value for renewal function ii) buy now pay later and iii) workflow integration which boosted 2024. Cost growth should normalise after 2024 but the company will continue to invest. Rightmove (+) CFO Ruaridh Hook Management provided an upbeat overview of prospects following the recent results. Cyclical trends are...
PUB PUB REL SCHA VENDA RMV G24 PRX HEM UMG LTMC
What happened? Publicis announced today it has entered into agreement to acquire Lotame, a leading independent Identity solution. Lotame is home to one of the largest end-to-end data marketplaces in the world, spanning 109 countries. Its proprietary identity solution delivers consistent and relevant addressable audiences built on 100+ data sources and activated through more than 1.6 billion IDs, for over 4,000 of the world''s leading brands and publishers to leverage at scale and with precision. The terms of the deals have not been disclosed. This acquisition remains subject to customary conditions to closing and is expected to close early in the second quarter of 2025. BNPP Exane View: The acquisition of Lotame is important as it should strengthen Epsilon on three key areas . Expanded global identity: The combined footprint of Epsilon and Lotame will expand Groupe''s unique profiles to almost 4 billion, extending global coverage to more than 90% of consumers worldwide . Product development: The combination should support global and local-market product development, supported by dedicated engineering, partnerships, and operations specialists. . Geographical expansion: Lotame will drive APAC and EMEA expansion of Epsilon, continuing to work with publishers, data partners, and brands across the regions. It is important to note that the quality of Lotame data is inferior to what Epsilon built over the years as it is mostly based on digital identity (non PII) while Epsilon combine both non PII and PII data. A rough calculation implies that Epsilon ID was valued at c. USD13 / ID vs USD0.08 / ID for Lotame. With an estimated EUR60/70m net revenue from Lotame stand alone, the impact on Publicis topline is limited (+0.5% at group level) and the level of margin is likely below group''s average. That said, once Lotame will be part of Epsilon platform, it will strengthen even more the offer which could translate into important revenue synergies with elevated...
Publicis Q4 / FY 24 results came in slightly above estimates thanks to stronger organic sales momentum (+6.3%) which came c.450bp above peers level (based on our estimates). Group guides for +4/+5% OSG and slight margin improvement in 2025 which is in line with consensus estimates. The release reinforces our view that Publicis is best positioned among the top agencies and the company should continue outperforming its peers on OSG (c.+5.0% OSG pa, +250bp vs peers) while maintaining some of the best margins and FCF conversion within the sector. We maintain our Outperform rating and increase our TP to EUR142 (from EUR137). Solid end to 2024 with Connected Media still driving the group''s growth momentum Publicis Q4 24 organic sales came above estimates at +6.3% (vs VA cons. +6.0%, Publicis cons. +5.7%). Connected Media (up HSD) continues to support growth while Intelligent Creativity was up MSD and Sapient was flat (vs LSD decline in Q3 24) on an organic basis. Adj. EBIT margin was in line YoY at 18%. Operating leverage was offset by reinvestment in talents and AI. Average net cash position was better than expected thanks to lower-than-expected WC outflow and MandA. FY 25 guidance as expected, we see upside potential Group guides for +4/+5% organic sales growth (vs cons. +4.5%), slight improvement in Adj. EBIT margin (vs cons. +10bp) and EUR1.9/2.0bn FCF. Group expects to spend EUR800/900m in MandA this year to reinforce capabilities in data, production, digital media and tech (Sapient). Considering underlying market trends, positive net new business effect (+2%), sustained growth of content production, last year MandA (Influential, Mars United Commerce) entry into organic sales calculation in H2 25, we think Publicis can deliver +5.5% OSG in 2025 and +10bp margin improvement. Adj. EPS largely unchanged with better FX impact offset by higher financial expenses We increase adj. EBIT by c.+1% on better FX and MandA but this is offset by higher financial...
Conclusion Publicis'' management gave a confident message during the conf call highlighting solid Q4 performance, differentiated models and capabilities, capacity to sustain outperformance relative to peers in 2025 and potential upside from consolidation in the industry (OMC/IPG merger process). Q1 25 mid-point of the guidance came below estimates and reflects cautious assumptions for Sapient. Considering the net new business effect and consensus estimates for top IT consulting firms, we see upside potential on Q1 25 guidance. As for FY 25, we also see good upside potential on OSG driven by net new business momentum, likely sequential improvement for Sapient, benefits of its recent bolt on acquisitions, we think Publicis can maintain 5% OSG in 2025 (vs cons. +4.4% OSG in 2025). Potentially, Publicis could benefit from OMC/IPG merger process through additional business wins in the second part of the year. Post the release, we expect consensus estimates by +1/+2% on the back of stronger FX impact on topline. Action Stock price decline -2% at the open (disappointment on Q1 25 guidance we suspect) but is now up c.+3% given encouraging comments from management during the call. Publicis remains our top pick in the sector. Publicis is the best positioned in the industry given its scale (notably media in the US), attractive business mix (c. 60% on connected Media, c.25% Intelligent Creativity, c. 15% on tech), differentiated go-to-market (data-infused media, differentiated offers on commerce/influencer/CTV), and efficient platform/cost structure. Considering its access to first-party data (Epsilon), AI knowledge/expertise (25k Engineers at Sapient) and its platform organisation, Publicis looks well positioned to efficiently deploy Gen AI tools across the organisation. We are constructive on Publicis'' recent acquisitions (Mars United Commerce, Influential) which have strengthened the group''s position in critical and fast-growing segments...
Conclusion Publicis Q4 24 organic sales came above estimates at +6.3% (vs VA cons. +6.0%, Publicis cons. +5.7%). Based on our OSG estimates for other top agencies, Publicis Q4 24 OSG came c.450bps above peers'' level (WPP, IPG, OMC based on gross revenue). As in previous quarters, Connected Media supported the growth (high single digit) while the trend for Sapient improved sequentially (flat in Q4 vs. slight decline in Q3). We note an acceleration for creative up mid-single digit thanks to Pfizer contract and growth for content production. FY 24 adj. EBIT came +1% above estimates at EUR2,519m which implies 18% adj. EBIT margin (flat YoY). Given solid operating leverage on organic sales, stable margin implies sustained reinvestment in the business. Group guidance for FY 25 (+4.0/+5.0% organic sales increase, slight margin improvement and EUR1.9/2.0bn FCF before WC change) came mostly in line with consensus estimates. Considering underlying market trend, positive net new business effect entering 2025, sustained growth of content production, last year MandA (Influential, Mars United Commerce) entry into organic sales calculation in H2 25, we see upside potential on group''s OSG guidance. For Q1 2025, group expects OSG within the FY guidance range (ie +4%/+5%) vs VA cons. +5.8%, Publicis cons. +5.1%. Expected sequential slowdown mostly related to 2 years stack comp base and cautious assumption for Sapient. We expect the stock to be marginally up at the open. Conference call to be held at 9.30am (CET). Read across for the Ad Agency sector Publicis is the first among top Ad agencies holding to report its Q4/FY 24. Solid Q4 and FY 25 guidance in line could be supportive for the sector. That said, Publicis'' performance is mostly driven by differentiated assets (notably Epsilon and Media) so we would not make a direct read across for the others. Q4 24 key highlights Q4 24 net sales increased +8.9% YoY at EUR3,854m (+2% vs cons.). The growth was...
Publicis'' Q3 24 organic sales were again solid at +5.8%, which implies 300bp outperformance relative to peers. Management has raised the floor of the FY 24 guidance (to 5.5-6.0% from 5.0-6.0% and consensus at +5.6%), which implies +5-7% in Q4 24. Management has opened the door for some margin improvement from 2025 which could support HSD adj. EPS growth while it continues investing in the business. The release reinforces our view that Publicis is best positioned among the top agencies and the company should continue outperforming its peers on OSG (c.+4.5% OSG pa, +200bp vs peers) while maintaining one of the best margins and FCF conversions within the sector. We maintain our Outperform rating and increase our TP to EUR130 (from EUR125). Solid Q3 24 (OSG +5.8% supported again by Media/Epsilon (c.+10%) Q3 24 organic sales increased +5.8% (in line with consensus), driven by Media/Epsilon (c.+10%), while Creative was up MSD (accelerating) and Sapient was down c.-1% (improving sequentially). Floor of FY24 OSG guidance increased to +5.5-6.0%, implies +5-7% OSG in Q4 Management increased the floor of the FY 24 guidance (to 5.5-6.0% from 5.0-6.0% and consensus at +5.6%) while maintaining the adj. EBIT and FCF outlook. Considering the global macro environment, solid trends in 9m 24, improved net new business win effect, and likely sequential recovery of Sapient, we model +6.3% OSG in Q4 (in the middle of guidance range). Management opens the door for margin improvement by next year, could support HSD EPS When presenting its Gen AI strategy for early 2025, management said the investment should be accretive to adj. EBIT margin by 2025 but that group margin would not necessarily improve. During the Q3 call, management opened the door for some margin improvement at the group level. We lift our 25/26 EPS by 3% on FX, MandA and +10bp margin improvement per year (leaving ample room for continued reinvestment); our target price rises to EUR130 (from EUR125) on...
Q2 24 organic sales growth came above estimates at +5.6% helped by Media (c.+14% OSG). This implies c.350bp outperformance relative to peers based on our estimates. Publicis updated its FY OSG guidance to +5/+6% vs +4/+5% previously and maintained its outlook for adj. EBIT margin (stable at 18%) and FCF before WC (EUR1.8/1.9bn). The release reinforces our view that Publicis is best positioned among top agencies and the company should continue outperforming its peers on OSG (we estimate c.+4.5% OSG pa, +200bp vs peers) while maintaining the best margin and FCF conversion within the sector. We make minor changes to our estimates following results. See recent report for more details about investment case. Reiterate Outperform rating with EUR125 price target. Solid Q2 24 underpinned by Media and Epsilon Q2 24 net sales increased +6.8% YoY to EUR3.5bn. The growth was supported by +5.6% OSG, +0.8% MandA, +0.4% FX. Performance was solid across the board with at least mid-single digit organic sales growth in all regions. Media (c.+14% OSG) and Epsilon (+6.1%) are again driving the growth. Growth trends for Sapient remained soft at -3.8%. H1 24 adj. EBIT is up +6% YoY to EUR1.2bn. Mid point of FY organic sales guidance within reach Management upgraded FY 24 organic sales guidance to +5/+6% (vs +4/+5% before) which implies +4.5/+6.5% OSG in H2 after +4.5% in H1 24. Considering the global macro environment, solid trends in H1 24, improved net new business win effect, and likely sequential recovery of Sapient, we believe the mid-point of the new guidance seems within reach. Conference call main highlights (1) Guidance upgrade reflects stronger H1, differentiated model and stronger net business wins. (2) Limited visibility on Sapient recovery but mid to long term growth potential intact. (3) Epsilon+ Media up double digits. (4) MandA envelope EUR700/800m reiterated, implying higher MandA in H2. (5) Data, single infrastructure and engineers'' culture are key...
We believe Publicis remains best placed to outperform peers thanks to its scale (notably Media in the US), attractive business mix (c.33% sales on tech/data), exposure to fast-growing segments (Retail Media), competitive advantages in the GenAI thematic and efficient platform/cost structures. This should underpin +4.5-5% organic growth pa, +200bps vs. peers, while maintaining the highest margins and FCF conversion in the sector. We think Publicis is well positioned to benefit from Retail Media growth given differentiated assets. Our reverse SOTP suggests these assets are under-appreciated by the market. We reiterate Outperform and raise our TP to EUR125 (from EUR120). We turn more constructive on Epsilon After dissecting Epsilon''s underlying market growth drivers, its differentiated offering, and self-help initiatives, we turn more positive on Epsilon and raise our organic growth forecast to c.8%+ pa (vs. +6% before). This alone adds c.+40bps to our Publicis group organic growth. Epsilon''s impact goes beyond its standalone unit and supports all other verticals (Creative, Media, Gen AI, Tech). Recent account gains to support growth momentum Publicis recently secured key account wins including Pfizer (creative), Lego (media) Spotify (media) and L''Oreal (UK Media). This should more than offset the loss of some of GM creative business. All else equal, recent net new business wins should contribute c.1% to organic sales in 2025. Sapient remains soft for now, but we expect a pick-up from 2025 We lower our Sapient FY24 LFL sales estimates to +1% from +3% given recent peer commentary and muted performance. But we are optimistic Sapient will be accretive to group mid-term growth. Estimates slightly up on stronger organic sales, target price up to EUR125 (from EUR120) We raise our 2025 and 2026 Adj. EPS estimates by c.+1% on higher organic growth (+4.5-5% vs c4% previously), notably at Epsilon as well as Creative/Media (reflecting recent net business wins).
Publicis started the year on a solid note with +5.3% organic sales growth (vs cons. +4.4%). Once again the trend was supported by Media and Epsilon. The group maintained its organic sales guidance for the FY at +4/+5%. Considering the global macro environment, solid trend in Q1 24, net new business win effect (including Pfizer creativity), and likely recovery of Sapient, the high end of 2024 guidance appears within reach. As detailed in our recent report (AGENCIES: Comeback kid(s)), we think group''s differentiated business mix, first party data and efficient platform/costs structure will support sustained outperformance relative to peers. Based on our valuation of Epsilon and Sapient, the rest of the business (Media + Creativity) is trading with a c.10% discount relative to peers. Solid start to the year with +5.3% organic sales growth Q1 24 net sales increased +4.9% YoY at EUR3,230m. The growth was supported by +5.3% OSG, +0.5% MandA, -0.9% FX. Performance was solid across the board with mid-single digit organic sales growth in all regions. Epsilon (+6.8% OSG) and Media (double digit OSG) continues to drive the business. Sapient remained negative but improved sequentially at -1% (of which +2% in the US). Group confirmed FY24 guidance Management reiterated its guidance which is based on 4% / +5% organic sales (vs consensus at +4.6%), adj. EBIT margin at c.18% (cons. 18.1%) and FCF of c.EUR1.8/1.9bn (vs EUR1.9bn for cons.). Considering global macro environment, solid trend in Q1 24, net new business win effect (including Pfizer creativity), likely recovery of Sapient, the 2024 guidance seems clearly within reach. Conference call main takeaways (1) On track to meet the MandA envelope for the FY (EUR700/800m), (2) Sapient: Pleased with improvement in the US but mgt. prefers to remains cautious given peers'' recent comments, (3) Media outperformance driven by its people and Epsilon, (4) Tech clients'' rebound driven by scope expansion of existing clients...
We recently hosted a virtual roadshow with Arthur Sadoun (Chairman/CEO), Michel-Alain Proch (CFO) and Loris Nold (incoming CFO). Following the meetings, we have increased confidence in Publicis''s ability to deliver its FY 24 guidance as well as continue outperforming peers in the years to come given several competitive advantages in key areas of the business (business mix, integrated model, first-party data with Epsilon, AI knowledge with Sapient). Valuation still does not capture all the positives Given its solid MandA track record, we support the current capital allocation policy (c50% on MandA and capex, c50% return to shareholders through dividends and SBB). Publicis has rerated a lot in the past 18 months (from 8x P/E to 13x), but current levels still fail to reflect underlying growth momentum, the value of its differentiated assets (Epsilon, Sapient) and solid FCF conversion. 2024 guidance Management feels confident about guidance since it is not based on a back-end-loaded recovery but on sustained performance through the year. There could be upside to guidance if a better macro environment leads to a faster recovery at Sapient and less cuts in traditional advertising. Sapient Management remains very positive on mid-term growth prospects for Sapient. Organic sales should remain negative in Q1 (while improving vs Q4 23) and improve sequentially in the following quarter. Sapient is not expected to grow above group target in 2024 (+4/+5%). Retail Media Thanks to Epsilon first-party data, Media capacity, Citrus Ad (Retail Media SaaS platform) and Profitero (analytic e-commerce platform), Publicis believes it has a differentiated offering for Retail Media and is well positioned to capture solid share in the segment.
Publicis 2023 results came in slightly above on adj. EPS. Guidance for 2024 is solid both in absolute terms (+4/+5% OSG, c.18% adj. EBIT margin) and relative to peers. Share buy back should be stable YoY but dividend is stronger than expected and group sees higher MandA spending. Publicis remains our top pick within the Agency segment. Despite the recent rerating, valuation multiples (12.9x PE 2024e) fail to reflect the solid business model, differentiated go to market, efficient organization and competitive advantages on Gen AI. Solid 2024 guidance both in absolute terms and relative to peers Publicis is guiding for +4/+5% organic sales growth (vs cons. +3.7%), stable adj. EBIT margin (c.18% vs cons. 18.1%) and high single digit FCF growth (in line with cons.). Considering the global macro environment, Q4 23 exist rate (OSG +5.7%), net new business win effect, likely recovery of Sapient, the 2024 guidance seems within reach. The +4/5% OSG compares to c.+1.9% for main peers. Share buy back kept stable offset by higher dividend and MandA Some investors might have been disappointed by the lack of a higher share buy back (EUR200m for 2024). To us, this is more than offset by the higher dividend (+17% YoY, c.49% payout ratio) and higher MandA prospect (knowing group''s track record and strict value creation criteria on MandA). Conf call key highlights (1) Epsilon and Media to drive +4/+5% OSG in 2024, (2) Sapient to sequentially improve and turn positive some time into the year, (3) Stable margin: operating leverage and efficiencies to be offset by investment in Gen AI, (4) No major contract to be reviewed in the short term. Estimate changes Our estimates are broadly unchanged. Higher organic sales growth (+4.5% vs +3.7% before) is offset by higher headline financial costs.
With the introduction of ''Core AI'' (internal platform to leverage data through Gen AI tech), Publicis ambition is to become an ''Intelligent System Company'' allowing all its employees to access the powerful tool and to better serve clients. This approach, which we believe can''t really be replicated by peers in the short and mid-term, should support further topline outperformance while maintaining the highest margin among the Top 4 Agencies. We keep our OPF rating with revised TP of EUR110. ''Core AI'' is a powerful platform that will support (and not replace) employees ''Core AI'' unifies all of Publicis'' proprietary data including the leading consumer data across 2.3 billion profiles of people around the world, with trillions of data points about content, media, and business performance, and almost a petabyte of assets on Marcel, all combined with 35 years of business transformation data and coding owned exclusively by Publicis Sapient. The use cases showcased during the presentation were convincing and already demonstrated the benefits of the platform. Publicis has several competitive advantages on Gen AI thematic Considering its access to first party data (Epsilon), AI knowledge / expertise (Sapient, 45k engineers/ data analysts), and its platform organization, Publicis looks well positioned to efficiently deploy Gen AI tools across the organization. None of the other Top 4 players can replicate this in the short and mid-term. The additional costs to implement this new approach is limited (EUR300m over 3 years) and is expected to be accretive on margin by 2025 thanks to sales boost. Publicis continue to outperform in 2024 after a very solid Q4 23. Upping our TP to EUR 110 Publicis Q4 23 organic sales came ahead of expectations at +5.7%. This is a solid performance both in absolute (comp base at +10%) and relative to peers (+440bp vs peers based on our estimates). Once again, it was driven by solid trend for Epsilon and Media business. We...
We hosted a roadshow in Paris with Publics CFO (Michel Alain Proch) and IR team (A.Girolami) following Q3 23. Key topics of discussion included: Epsilon, sustainability of outperformance relative to peers, Gen AI tools, margin, hiring, MandA and Q4 guidance. Management comments during meetings were supportive and reinforce our view that Publicis has built several competitive advantages that will be difficult for peers to replicate in the near future and that should support c.+50bp OSG outperformance relative to peers. We keep Outperform rating with EUR95 price target. Publicis sees various growth relay for Epsilon Management highlights that Epsilon is a core asset in the organization and an important driver of outperformance notably for Media. By coupling the scale of Publicis Media in the US and Epsilon Core ID, Publicis offers a differentiated and efficient way to connect with clients. Epsilon intends to gain in Europe and LATAM notably through the JV with Carrefour on Retail Media (Unlimitail). The end of third-party cookies (end of 2024e) is another growth driver for Epsilon in the next quarters. Publicis ambitions to maintain outperformance in the years to come For the management, the outperformance relative to peers is explained by balanced revenue mix (Tech/Data/Media/Crea), differentiated go to market (Epsilon x Media) and agile platform organization (Global delivery Centers, shared services, Country Model, Marcel). Those competitive advantages took years to implement or come from acquisitions that are difficult to replicate today. MandA: Various bolt on acquisitions in the pipeline Group CFO confirms Publicis is still looking to reinforce, through bolt on acquisitions, its capacity at Sapient, Epsilon, Commerce and Gen AI tools. Group expects to meet its EUR500m/EUR600m MandA envelope for 2023 which implies c.EUR400m in Q4 alone. More on page 2.
Publicis again beat expectations. Organic net revenue was up +5.3% driven by Media and Epsilon. Europe was fast-growing, above expectation. In the US (60% of net revenue), Publicis was impacted by the ongoing challenging environment which led to some cuts in classic advertising and delayed projects in digital transformation. Based on the good numbers in the first nine months, Publicis upgraded its organic net revenue growth guidance to +5.5-6.0% and is expecting an operating margin rate of 18.0% of net revenue.
Publicis delivered strong Q3 sales (OSG +5.3% vs +3.8% cons.) with solid momentum at Epsilon and Media offsetting slowdown at Sapient and low single digit growth for Creativity. The group upgraded all its financial KPIs for 2023 with a mid-point at c.+1% ahead of consensus. This release shows once again Publicis'' competitive advantages (balanced business mix, differentiated go to market, agile platform organization) that should support further outperformance in the near term. We increase estimate by c.+2% and price target to EUR95 vs EUR93. Outperform reiterated. Q3 momentum well ahead of expectations thanks to Epsilon and Media Q3 23 sales grew +0.1% at EUR3,241m (+2% vs cons.). The growth was supported by +5.3% OSG, +1% MandA, -6% FX. On a compound basis vs 2019, Q3 23 OSG came at +5.1% an acceleration vs +4.7% in Q2 23. The growth was driven by Europe (OSG +10.7%) while the US slowed down at c.+3.2%. Epsilon OSG accelerated at +10.5% (vs +6.8% in Q2), while Media remains solid at c.+8% helped by global Media wins. Guidance on all KPIs once again upgraded The group increased its FY 23 guidance and now expect LFL sales between +5.5% and +6% (vs c.+5% before and cons. at +5.2%), margin of 18% (vs ''around 18%'' before and cons. At 18.0%), FCF before WC at c.EUR1.7bn vs EUR1.6bn before. Based on our calculation, the mid-point of the guidance implies c.+8% EPS growth (c.+1% vs cons.). Conference call main highlights (1) Q4 organic sales trend per practice likely in line with Q3, (2) Solid momentum at Epsilon to be maintained in the near future, (3) No cut at Sapient, mostly delays. No doubt the trend will reaccelerate as soon as macro improved. (4) Media very strong notably in Europe thanks to new global media wins, (5) MandA transactions in the pipeline to match the 2023 EUR500m/EUR600m MandA investment objective, (6) FX impact on revenue expected EUR-350m (c.-2.8% headwind).
Superior business mix and recent contract wins should help Publicis continue to gain share and outperform peers (c.+50bp on LFL est.). We expect the group to at least maintain its relatively high margin in the mid-term thanks to operating leverage and cost efficiencies. With financial leverage ratio back at c. 1.0x end of 2023, we see potential for increased return to shareholders, notably via higher share buybacks. All in all, we think Publicis deserves to trade at a premium to peers. We reiterate Outperform, with a revised EUR93 TP (vs EUR95) implying a 20% EV/EBIT premium. Best positioned among the top 4 agencies Considering its scale, well-balanced business mix (Tech/Data, Media, Creativity incl. production each accounting for 1/3), go to market (media infused with data), cross fertilization of data, tech with media and creativity, good exposure to fast growing segments (retail, media) as well as an efficient platform/cost structure, Publicis appears best positioned among the top 4. We expect continued growth outperformance vs peers in the next quarters Driven by a favourable business mix (data, tech), solid momentum for Media practice and the net effect of recent contract wins (Pfizer notably), we expect Publicis to maintain c.+3.5% LFL sales momentum in the next quarters, i.e., c.+50bp above peers. Likely to reinvest most of operating leverage benefits to drive top line Publicis generates the highest margin among top 4, while also leading the pack on bonus payments (c.4.5% vs c.3.5% for peers). We estimate broadly stable margins in the next years and consider that the expected c.+3.5% 2024-25 LFL growth, initiatives on offshore, office footprint optimization should allow Publicis to reinvest in top line to drive higher LFL sales for longer. Cash me if you can! Publicis''s leverage ratio should be down to c.0.9x end of 2023 vs 2.5x end of 2020. Considering solid FCF conversion, there is room for Publicis to increase cash return...
Publicis beat expectations in Q2 23. Organic net revenue grew by +7.1% thanks to a good performance in a wide range of countries and geographic areas. Media was the best performer thanks to the gain of new businesses while the activities at Publicis Sapient (+5.5%) and Epsilon (+6.8%) slowed vs the high comparative last year. In H1 23, the operating margin was stable (17.3% of net revenue) thanks to effective cost management. Publicis now expects to achieve the top end of the 2023 guidance.
Publicis Groupe reported Q2 and H1 2023 results above consensus Publicis Q2 23 organic growth came at +7.1% versus consensus at +4.7% (implying a 18% 2y stack, in line with Q1 23). The performance was led by Europe with the fastest organic growth rate at +15%. US came at 5% with Sapient at 5% and Epsilon at c+7%. At the Group level Sapient came at 5.5% (vs 19% last year) and Epsilon at c7% (vs +14% last year). We also note an acceleration of media driven by the contribution of new businesses. Operating margins for H1 23 came 50bps ahead of consensus and diluted EPS 10% ahead of consensus at EUR3.21 per share. The company also upgraded FY23 guidance Publicis Groupe upgraded its FY23 guidance with FY23 organic net revenue growth now expected at c5% (vs 4%-5% previously). Operating margin rate close to 18% (vs 17.5%-18% previously) and FCF of at least EUR1.6bn (vs cEUR1.6bn previously). Current Visible Alpha consensus for FY23 organic growth is 4.5% and for operating margins 17.8%. Forecasts changes We increased our FY23 organic growth forecasts from 4.8% to 5% to reflect the new organic growth guidance. We do not change our 18% margin forecasts for FY23e but we cut our FY24 and FY25 margins from 18.1%/18.3% to 18% for both years, which we reckon is more in line with Publicis Groupe ambition in the medium-term. We did some housekeeping (financial income, Forex etc) to reflect the company''s comments. Bottom-line, we increase our EPS by 2% for FY23e. We keep our target price unchanged at EUR95 per share, suggesting 33% upside. We remain Outperform on Publicis Groupe In a sub-sector that is set, in our view, to benefit from a re-rating, we continue to see Publicis Groupe as a strong long-term play. At 10x PE 24e and 11% FCF Yield, we believe the risk reward is very appealing and rate Publicis Groupe Outperform.
Better-than-expected organic growth Publicis Groupe reported +7.1% organic net revenue growth versus a conservative consensus at +4.5%. This implies a 18% 2y stack (stabilization versus Q4 22) and a 22% 3y stack. The beat was driven by a strong performance in Europe, at +c13%. We note Epsilon came in at +10% (Q1 2022 comp +7%) and Sapient came in at +11% (on a tough 18% comparative in Q1 2022). Solid message on the outlook The company confirmed FY23 guidance while providing a small ''upgrade'', with the company now expecting organic growth to reach the ''top half of the 3% to 5% range''. Margin guidance was reaffirmed between 17.5% to 18% and FCF guidance confirmed too. Publicis also provided guidance for Q2 2023 of between +3% and +5%, which implies a growth deceleration in H2. On this topic, during the call, Management highlighted that: i) H2 has tough comparatives; ii) the macro remains challenging; and iii) the back end of Q4 is always difficult to predict. That said, we see the small organic guidance upgrade as a positive. Non-material forecast changes We have updated our model for Q1 and tweaked our quarterly estimates: we now expect Q2 2023 at +4.2% organic and H2 2023 at +4.2%. We increase by 10bps our FY23 organic net growth estimates from 4.7% to 4.8%, driven by Latin America and Middle-East and Africa. We keep our 18% margins estimate unchanged for FY23. Bottom-line, our EPS does not materially change for FY23e/24e and we also keep our target price at EUR95 per share, suggesting c24% upside. We rate Publicis Groupe Outperform In a sub-sector that is set, in our view, to benefit from a re-rating, we continue to see Publicis Groupe as a strong long-term play. At 11x PE 24e and 10% FCF Yield, we believe the risk reward is very appealing and rate Publicis Groupe Outperform.
Organic net revenue growth (+7.1%) was above the company’s expectation in the Q1 23. Publicis delivered strong growth in its major geographic areas and a good performance in its activities. Publicis Sapient and Epsilon (one-third of group revenue) continued to outperform with double-digit growth. The 2023 guidance is unchanged but the top-half of the organic net revenue growth is now targeted.
Organic net revenue growth (+7.1%) was above the company’s expectation in the Q1 23. Publicis delivered strong growth in its major geographic areas and a good performance in its activities. Publicis Sapient and Epsilon (one-third of group revenue) continued to outperform with double-digit growth. The 2023 guidance is unchanged but the high-end for organic net revenue growth is now targeted. There should be a modest impact on our EPS estimate and valuation following an increase to our organic net revenue growth forecast from +4% to +5%.
We are turning even more bullish on the advertising agency sub-segment After having been cautiously optimistic on the ad agency outlook throughout COVID-19 and the Ukraine/Russia conflict, we are turning even more bullish. We believe that the agency model is stronger than the market currently prices in, and that this sub-segment should be on the more ''quality side'' of the media sector instead of the ''cheap cyclical'' side of it, given: i) more visible organic growth and ii) mid to high single digit EPS growth and double digit FCF yield. (See our sector report here.) Publicis''s first-mover advantage should compound over time We continue to like Publicis Groupe''s first mover advantage in revenue diversification towards faster growing revenue streams such as Epsilon, Sapient, Retail Media (Food retail, Staples and Media - the rebalancing) and Production, but also cost efficiency, on shared-services and offshoring (we estimate that the company has c30% of its headcount offshore versus peers at c10%). Raising our forecasts and our TP to EUR95 (from EUR82) We increase our organic net sales growth expectations by 50bps for FY23e from 4.2% to 4.7% (towards the high end of company guidance) and our 24e/25e forecasts by 140bps/50bps. We also increase by 20bps our 24e/25e operating margin to 18.4% in 2025e to reflect higher operating leverage. We raise our TP to EUR95, as a result of our higher short and longer term forecasts and a slightly lower WACC. We stand 7% above consensus FY23e EPS, and 6% above for FY24 EPS, reflecting our more bullish approach on operating leverage. We reiterate our Outperform rating on Publicis Groupe In a sub-sector that is set, in our view, to benefit from a re-rating, we continue to see Publicis Groupe as a strong long-term play. At 10x PE 24e and 11% FCF Yield, we believe the risk reward is very appealing and rate Publicis Groupe Outperform.
We hosted Publicis Groupe management for their French and Middle Eastern roadshow CEO Arthur Sadoun and CFO Michel-Alain Proch provided an upbeat overview of the group''s performance and the key reasons behind Publicis'' better-than-expected performance. Despite the ongoing uncertainty around the macroeconomic outlook, we found Management commentary supportive on revenue visibility, and the benefits of the Publicis operating model for both the top line and margins. Focus 1: 2023 A key element of surprise during the FY22 results release was the guidance, from a ''very solid 3%'' to the ''ambitious 5%'' organic net revenue growth. Management elaborated, underlining that clients are relying on their marketing partners to navigate an increasingly complex digital ad ecosystem, alongside a consistent need for digital transformation. Focus 2: the longer term- Publicis well placed with clients Management explained that the Publicis model is starting to pay off, with a combination of: 1) business mix diversification, supporting net revenue growth; 2) a top-notch operating model, enabling substantial talent reinvestment; and 3) good performance of the global delivery centres, supporting the Power of One strategy. Reiterate Outperform Publicis remains a key pick in media, offering exposure to a structural rerating story driven by a more visible revenue transition, a best-in-class operating model and strong FCF yield. For more on our key picks for the year please see How to play media in 2023?.
Publicis Groupe reported FY22 result ahead of consensus Q4 organic net revenue growth came in at +9% versus consensus at +5%, implying a 15% 3y stack. We note the strong momentum of Epsilon at +26% 3y stack and Sapient at +36% 3y stack. Margins came in line with consensus with the company paying a record high bonus pool as % of net revenues. The main surprise: positive organic growth outlook for FY23 In our view, the key highlight of the result was that the company guided for organic net sales growth between 3% and 5% for FY23, above pre-result consensus of c0%. Margins-wise, the company guides for headline operating margins between 17.5% and 18% and expressed confidence during the call in its ability to absorb cost inflation. We note that the announcement of a EUR200m share buyback was also a welcomed initiative. More clarity on capital allocation in the medium-term During the call, Management clearly stated that the company capital allocation policy in the near future does not involve a larger-scale buyback program. Publicis Groupe announced a EUR500-600 MandA envelope for bolt-on acquisitions, which we believe is a key investment to support the development of growth accretive revenue streams (Sapient and Epsilon). Reiterate Outperform: Publicis well-placed in 2023 and beyond - key pick in Media and Internet We increased our EPS forecast by 5% for 2023e and by 2% for 2024e reflecting the healthy growth outlook and the stabilizing share count. Publicis remains a key pick in media offering exposure to a structural rerating story driven by a more visible revenue transition, a best-in-class operating model and strong FCF yield. We upgrade our DCF-derived target price to EUR82 per share (from EUR73), suggesting 16% upside. For more on our key pick for 2023 please see MEDIA and INTERNET : How to play Media in 2023? (133).
Q4 22 was significantly better than expected. Organic net revenue surged by +9.4% driven by strong growth in media, Publicis Sapient and Epsilon in the US and a positive trend in Europe led by Publicis Sapient, creative and media in the UK. In 2022, Publicis met expectations with an operating margin in the high range of guidance, or 18% of net revenue. Publicis surprised the stock market by giving favourable 2023 guidance for the top line (organic growth of +3-5%).
Publicis published its Q3 2022 revenues ahead of expectations Publicis posted c10% organic net revenue growth in Q3 versus consensus at +5% (BNPPE at c+7%), suggesting a 23% 2-year stack and a 16% 3-year stack. Overall, the beat was led by i) macro concerns having not materialized and ii) better-than-expected performance for Sapient and Epsilon (now accounting for a third of Publicis net revenue), which have seen an acceleration of 3-year stack growth through the year. The Group upgraded FY22e guidance (again) Publicis upgraded its FY22e guidance for the second time this year. The company now expects 8.5% organic growth versus 6%-7% previously, margins ''close to 18%'' versus 17.5%-18% previously and FCF to be now ''close to EUR1.6bn'' versus ''at least EUR1.5bn'' previously. We note that the new guidance implies a higher Q4 than previously anticipated. The company made little comment on 2023 but expressed confidence in their model and outlined that clients are (for now) keen to invest while facing ongoing challenges and uncertainties. One-off bonus in the context of upgraded margin outlook a clear positive The company also announced it will grant an exceptional bonus of one-week salary for c50% of the employees to support talent with no variable remuneration, which is in our view a key message of confidence for Q4. Forecast changes We upgrade our FY22e organic net revenue growth from 7.2% to 8.7% (above company consensus to reflect continued momentum in Q4) and we also upgrade our margin expectations for the next few years, with now 18.1% this year, 18% in FY23e and 18.2% in FY24e. Bottom line, we increase our EPS by 2%/3% for FY22e/23e and we increase our target price from EUR64 to EUR66. Publicis remains a key value pick in Media, offering strong FCF yield (c13% in 2023 on our numbers), improving fundamentals and more resilience to the cycle. We remain Outperform.
Organic net revenue growth was very strong in Q3 22 (+10.3%) and above expectation. The overall growth was driven by Publicis Sapient (+18.1%), Epsilon (+13.9%) and strong activity in Media and Creative in various countries. The US and Europe experienced strong growth (+11.1%). Publicis upgraded the 2022 guidance. Publicis is seeing no cuts in client budgets currently but has retained cautious organic net revenue growth for Q4 22 (+3-5%) as Q4 is usually a quarter of adjustment for clients.
