by Olivier Sorgho
(Reuters) – Publicis raised its annual forecasts on Thursday after reporting higher-than-expected organic growth in net income in the third quarter, pushing up its share price.
The communications group is now targeting organic growth of between 5.5% and 6.0% for 2023, compared to around 5% previously.
Publicis had already raised its annual forecasts in July.
On the Paris Stock Exchange, Publicis shares climbed 3.5% to 75.90 euros at 7:45 a.m. GMT, leading the CAC 40 up 0.18% at the same time.
JPMorgan analysts point out in a note that the new annual organic growth forecast implies a rate between 3% and 5% for the fourth quarter and should lead to a 2% increase in the consensus on earnings per share for the year.
Publicis’ net income stood at 3.24 billion euros in the third quarter, representing organic growth of 5.3% year-on-year. Analysts had expected growth of 3.6% according to a consensus compiled by the company.
The group also anticipates an operating margin rate of 18%, compared to close to 18% previously, and free cash flow before working capital requirements close to 1.7 billion euros, compared to at least 1.6 billion euros previously.
Publicis’ announcements come as the advertising industry is experiencing a slowdown. Publicis’ rivals WPP and Interpublic each lowered their annual forecasts this year, citing lower spending by their technology clients.
“We are seeing budget cuts in the area of traditional advertising,” said Publicis Chairman and CEO Arthur Sadoun during a conference call, also highlighting a weakening of the digital transformation market.
However, he added that the diversification of services offered by Publicis and its ability to obtain market share would allow the group to compensate for this slowdown.
“Better offer, better mix, better growth, better margin and better balance sheet,” summarize JPMorgan analysts.
(Report by Olivier Sorgho; by Camille Raynaud and Blandine Hénault, with the contribution of Clément Martinot, edited by Kate Entringer)
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