WPP's Plunge Shatters a Nascent Revival for Media Stocks

(Bloomberg) -- Just when it seemed like things were improving for advertising and media stocks, WPP Plc threw a big spanner in the works.

A 15 percent plunge in WPP brought an abrupt halt to a rally in Europe's Stoxx 600 media index, which was the best performing of all sectors in February, gaining 0.4 percent despite a global market rout. The gauge fell the most since June 2016 on Thursday, with advertisers including Publicis Groupe SA and broadcasting stocks such as ITV Plc also getting hit. Interpublic Group of Cos Inc. and Omnicom Group Inc. will be a focus when U.S. markets open later.

WPP said it had a “slow start” to 2018 and lowered its long-term profit outlook, in contrast to positive outlooks from Publicis and U.S. peer Interpublic earlier this month. The news soured sentiment toward advertisers and broadcasters, which had been improving on a stream of more positive news, also including Comcast Corp.'s bid for Sky Plc. The group was the only positive sector last month among 19 in the Stoxx 600.

It may be hasty to extrapolate negatives for the whole industry from WPP's results. In a note written ahead of the earnings, Berenberg analysts led by Alastair Reid wrote that investors should differentiate between agencies, as lower exposure to improving trends in North America and cautious commentaries from some WPP clients are among “clear reasons not to be carried away regarding WPP's scope for rebound.”

--With assistance from Kasper Viita

To contact the reporter on this story: Beth Mellor in London at bmellor@bloomberg.net.

To contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net, Paul Jarvis, John Viljoen

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