WPP reported organic growth above expectations but slightly disappointing margins WPP reported organic net sales growth of +8.3% (implying 29% 2y stack and 10% 3y stack), above consensus at +5.5% (arguably expected as Publicis, Omnicom and Interpublic also beat consensus earlier in July). While the company outlined that the performance was broad-based, the organic beat was driven by North America at +10.2% (25% 2y stack and c13% 3y stack) and GroupM at +10.9% in Q2 (on tough comps of +28.6%). However, margins came 30bps below consensus due to salary pressure in the US (mostly freelancers) where the company has grown faster than expected. Organic growth guidance upgrade with a confident message The company has also upgraded FY organic net sales growth guidance from 5.5%-6.5% to 6%-7%. New guidance still implies a deceleration between H1 to H2 on an organic and 2y basis, while it suggests a stable 3y stack between the two semesters. Margin guidance is unchanged. While management had a confident tone on ongoing momentum with clients, shares fell 8% at the opening; we believe that concerns around the margin trajectory in a tough macro environment are elevated. Changes to estimates We upgrade our organic net sales growth expectations from +5.9% to +6.5% following the guidance upgrade. We also reflect the lower income from associates (due to the Walmart account loss at Haworth and higher interest costs at Kantar post the Numerator acquisition). We keep our margin expectations unchanged and forecast 40bps margin expansion for FY22e. Bottom line, we decrease our EPS by 3% for FY22. We remain Neutral on WPP At a time when cyclical fears are returning to the advertising agency sub-segment, we argue that top-line visibility has improved, and we believe management is rather conservative on the rest of the year. An increasing portion of concerns are now related to the margin delivery and the 2023 outlook. At 8.5x PE 23, we argue that a lot of the risks...