Full-year expectations at Sir Martin Sorrell's media and advertising giant WPP Group are achievable, according to Jefferies which has upgraded its recommendation for the stock from 'underperform' to 'hold'.

Jefferies said that its caution had stemmed mainly from "1) a mismatch in commentary from multinationals on their advertising budgets and organic growth expectations/guidance; 2) a return to pre-2007 midcycle multiples; and 3) reliance on acquisitions to fund growth."

Following weak organic growth in the second quarter and a lowering of full-year guidance, the broker says that consensus forecasts are now moving to more reasonable levels. WPP is now guiding to a deceleration in the second half rather than an acceleration.

"Since May WPP's [price-to-earnings ratio] has fallen from 11.3x to 10.5x, closer to our target multiple of 10x. During the first half of the year, the group traded on a premium of up to +20% relative to the FTSE 100 which we viewed as unjustified given greater cyclical risks and low single digit organic growth," Jefferies said.

"However, since Q2 results WPP's rating has slipped relative to the market and is now at -7.3%, below historical average of -5%."

The broker has raised tis target price for the shares from 680p to 800p.

By 11:11 on Thursday, shares were up 0.54% at 842p.

BC

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