Publicis (PUB FR): Q1 revenues OK, but trajectory softening into Q2



Publicis Q1 revenues and organic growth of +4.1% was a same beat on our +3.1% estimate, although was behind Omnicom’s recently reported +5.2% and the warning tucked away in Publicis’s outlook section that it expects a lower rate of organic growth in Q2 will probably see a negative reaction on the shares this morning.  For the full year, Zenith is still forecasting global advertising growth of +4.8% and Publicis is also looking for a pick up in its own growth in H2 of 2012. With the group reporting “continued strict cost control”, there should be not too much slippage in current year earning expectations at this stage, although the Q2 negative trajectory will deter immediate buying interest. In terms of valuation, the shares are fairly priced on a prospective Op FCF yield of approx 7% to discount trend growth near the top end of its growth rating range of +4.6%.  While its positioning in digital  (+15.6% organic in Q1) and emerging markets (12% of revs & +10.1% in Q1) should keep it on the long term favoured list, the short term revenue outlook combined with the negative investor sentiment over the forthcoming French Presidential elections suggets that now is not the time or price to chase the shares

Publicis (Publ FR)
Share price                             €40.1
Growth rating FY14              +4.0%
Revenue CAGR FY12-14    +3.6%
Target CAGR (FY3)               +4.6%
Target price                            €40.4
Upside                            1%

KEY Q1 Figures
Revenues   +4.1% organic to €1,451m vs WYT est of +3.1% to €1,431m including
Europe         +3.6% organic to €412m vs WYT est of -2.0% to €407m     (o/w France +4.6%, UK +8.6%, Germany +10.1%, Spain & Italy down – undisclosed)
N. America  +3.3% organic to €724m vs WYT est of +4.0% to €734m
RoW               +7.1% organic to €316m vs WYT est of +8.0% to €290m

Net New Business $811m (exc GM loss of approx USD 1.8bn) vs WYT est of $1bn (excl GM loss)



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