PUBGY Publicis Groupe SA (QX)

   By Donato Paolo Mancini 
 

--Shares in Publicis slide by as much as 14% after 4Q disappoints

--Competitor WPP's stock is also hit by Publicis miss, falling as much as 8%

--Deutsche Bank cuts Publicis rating to hold from buy

Shares in Publicis Groupe SA (PUB.FR) dropped Thursday after the company reported earnings that analysts described as lackluster, with negative news spilling over to one of its competitors.

At 0924GMT, shares in Publicis traded 12% lower at EUR48.57 after losing as much as 14% in early trading. Its competitor WPP PLC (WPP.LN) was down 6% at GBP8.23 after shedding as much as 8%.

The French advertising group said Wednesday that a higher-than-expected retreat in traditional ad spending had affected business by 150 million euros ($171.3 million) in 2018. The majority of these clients are U.S.-based consumer-goods companies.

Analysts at Citi said Publicis missed revenue consensus but was ahead in operating profit.

"Publicis has done it again, and not in a good way," they said in a note. "As with 1H18, the group has put together a miss on organic revenue and a handsome beat on margins and earnings. Although we expect consensus earnings to move up by 3% to 5% on a combination of a higher profit base/margin and the impact of the EUR400 million buyback, we would nevertheless expect the shares to trade down as what Publicis gains on [earnings per share] is lost on the multiple."

Separately, Deutsche Bank analysts said the miss in the fourth quarter was greater than they had expected, and that they were looking "for a broad sign that growth was accelerating from the nine-month rate of 0.2%, driven by account wins and a shift to providing higher value services."

"However, the scale of the miss in 4Q took us by surprise, with attrition among existing accounts negating new business gains," they said.

They said the trend seemed set to continue into the first quarter of 2019, and moved the rating on the stock to hold from buy.

"We think the weak operating environment and further evidence of the challenges of turning around agency conglomerates will weigh on Publicis and its peer, WPP," they said.

Write to Donato Paolo Mancini at donatopaolo.mancini@dowjones.com; @donatopmancini

(END) Dow Jones Newswires

February 07, 2019 04:43 ET (09:43 GMT)

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