WPP shares declined c.-15% after the company missed Q3 25 OSG estimates and revised FY 25 guidance down again (c.-10% cut in adj. EPS estimates). We appreciate the new CEO''s strategic vision and near-term priorities but also recognize there is no quick fix for WPP, and rebuilding the group''s competitive positioning is likely to limit margin rebound and cash returns in the near term. Our estimates are down c.-4%, reflecting lower OSG and margin assumptions. We keep our Neutral rating. Our TP goes to 350p (from 430p) reflecting our estimate cuts and updated value of associates.
A soft Q3 25 with persistent pressure on existing client spending
WPP Q3 organic sales declined -5.9% (vs cons. -5.5%). Q3 25 weakness is explained by persistent softness in WPP Media (-5.7%) and creative services (-6.5%). Given net new business effect at c.-1.0% to -1.5%, existing client spending declined c.-4.5% to -5.0% (vs c. +2-4% for peers).
2025 guidance lowered again, Q4 25 trends expected to further deteriorate
Management again reduced its FY 25 outlook and now expects -5.5% to -6.0% organic sales decline (vs -3.0% to -5.0% before) and c.13% adj. EBIT margin (vs c. 13.8% before), which implies c.-20% adj. EBIT decline YoY. We think the new guidance likely includes a significant degree of caution to ensure the company does not miss when it presents the new strategy in early 2026.
Management to present a new strategy early 2026
New CEO Cindy Rose shared interesting comments regarding her key priorities but could not be too specific at this stage. Full details of the new strategic vision are expected to be shared in early 2026. As discussed in our recent report (A daunting task ahead), we think Rose''s success will depend on her ability to rapidly execute across five key areas: halting client losses, leveraging investments under WPP Open, addressing operational inefficiencies, restoring talent morale and rebuilding shareholder confidence. We do not expect a...
