We think WPP's (WPP) first-half results demonstrated the company's strong international position and growing digital platform. We remain comfortable with our 760p-per-share fair value estimate and believe the shares are undervalued after the recent general market pullback. Despite the strong first-half results, we anticipate top-line deceleration in the second half, given tough comparisons versus the prior year. Most corporate advertising and marketing spending is planned on a calendar-year basis, so we'd expect any material pullback in spending to be deferred until 2012. We anticipate lower growth next year, given the possibility of a weaker macroeconomic environment. Perhaps ironically, the most opportune time to invest in the shares occurs when the advertising market is weak or in decline, as the market projects poor recent results too far into the future.
WPP reported revenue growth of 8.1% in the first half (internal growth of 6.1%) as it continued to benefit from a robust advertising environment across the globe. North American sales improved 5.4% and growth in Brazil, Russia, India, and China increased 15% in the first half. We expect long-term growth for WPP to be driven by international markets, which is where the firm has focused its acquisition activity. We plan to follow up later with a more detailed note.
This is an example of a Morningstar analyst note, a feature of Premium subscription. Find out more about Premium here. Morningstar analysts write regular notes in response to company news and developments, supplementing their full investment these for the stock, including valuation, financial health and management assessment, risk rating and economic moats.
