WPP stock drops over 17% as weak Q4 results and 2025 outlook disappoint

Investing.com -- WPP’s stock has tumbled more than 17% on Thursday following  disappointing fourth-quarter 2024 results and weaker-than-expected outlook for 2025. 

Analysts at BofA Securities and J.P. Morgan have flagged concerns over continued revenue declines, client losses, and macroeconomic headwinds, leading to downward revisions in earnings expectations. 

The company’s struggles reflect a challenging environment for advertising and marketing agencies, with major clients tightening budgets and shifting strategies.

The latest results revealed a sharp downturn in organic growth, with fourth-quarter revenue declining by 2.3%, well below the modest 0.1% increase that had been anticipated. Full-year organic growth stood at -1.0%, underperforming the expected -0.5%. 

The weakness was widespread across key markets, with North America slipping by 1.4% in the fourth quarter, bringing its full-year decline to 0.7%. 

The UK fared worse, down 5.1% for the quarter and 2.7% for the year, as a pullback in project-based spending outweighed growth at GroupM and Ogilvy. 

The broader “Rest of World” segment also struggled, with revenue falling 4.8% in the fourth quarter, driven by a steep 20.8% decline in China due to client losses and broader economic challenges.

Among WPP’s business units, GroupM remained a bright spot, delivering 2.7% growth for the year and 2.4% in the final quarter. 

However, the company’s creative and advertising arm, Global Integrated Agencies, continued to struggle, with revenue falling 6.5% in the fourth quarter—an acceleration from the 3% decline seen in the prior quarter. 

Analysts attribute this deterioration to a combination of reduced discretionary spending by major clients such as Procter & Gamble (NYSE:PG) and internal restructuring measures that have disrupted operations.

Despite the revenue challenges, WPP’s profitability held up slightly better than expected. The company reported an operating margin of 15% for the year, just above consensus estimates of 14.9%, largely due to cost-saving initiatives. 

Adjusted operating profit of £1.71 billion came in line with forecasts, while free cash flow exceeded expectations at £738 million, benefiting from lower restructuring costs and improved working capital management.

WPP (LON:WPP)’s guidance for 2025 suggests another difficult year. Organic growth is expected to be between -2% and 0%, unlike the +2% growth anticipated by the market. 

J.P. Morgan analysts have now revised their own estimates to a 1% decline, down from their previous expectation of 1.5% growth.

The first quarter is expected to be particularly weak, with an anticipated 2.5% contraction, though management is forecasting a gradual recovery in the second half of the year.

Earnings expectations have been adjusted downward, with analysts cutting their 2025 EPS forecast by 6% to 84-85p, below the prior consensus of 90p. In response to the weaker outlook, J.P. Morgan has also lowered its price target for WPP from 960p to 860p.

Analysts remain cautious on the company’s near-term prospects. Macroeconomic uncertainty continues to weigh on advertising budgets, and growing competition from in-house agency models is adding further pressure. 

A key concern is the upcoming review of WPP’s business with Mars, which could have significant implications for the company’s ability to stabilize its client base. Until WPP can demonstrate a clear return to organic growth—likely not before the second half of 2025—investors may remain on the sidelines.