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WPP's Sorrell Sets Up Best of All Worlds for Wednesday's Revenue Report

Drama is building around WPP's Q2 2009 numbers, due on Wednesday: Will holding company chief Martin Sorrell cut his full-year revenue forecast a second time this year, indicating that he underestimated the severity of the recession? The Times:

Sir Martin Sorrell, WPP's chief executive, said in April that he expected sales to show a mid single-digit decline for the year, revising down his earlier prediction of a 2% drop. Analysts, though, think WPP may not hit even this revised target.
BNET noted in June that Sorrell appeared to be laying the groundwork for a dismal set of Q2 numbers. The Telegraph:
Analysts forecast revenues of about £4.27bn, reflecting an organic decline of about 7.9pc.
... analysts agree that WPP probably paid over the odds for its more recent large deals such as the May 2007, pre-recession acquisition of digital business 24/7 Real Media for $649m, and the late 2008 purchase of TNS, which came before the severity of the recession was understood.
WPP's shares, however, have bounced back from their recent dip. Deutsche Bank issued a "buy" recommendation, while other analysts argued that concerns over WPP's debt levels are overplayed.

Bottom line: The bad news appears to be fully priced in to the stock. This gives Sorrell the best of all worlds. If Wednesday's numbers are lousy, there won't be any surprises. If they're good, the stock will rise even more -- making Sorrell look like a genius.

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