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...
