1、North America Equity Research10 July 2025J P M O R G A NAd Agencies Q2 Preview;Can the Holding Companies Climb the AI Wall of Worry?Media,Entertainment and AdvertisingDavid Karnovsky,CFA AC(1-212)622-Kiscada A Hastings(1-212)622-Douglas Wardlaw(1-212)622 J.P.Morgan Securities LLCAhead of Q2 earnings

2、,were updating our models for OMC and IPG.For both companies,we reduce slightly full year organic but remain within guidance ranges which we expect to be reiterated;EPS forecasts move higher on FX.Our adjustments follow an update from WPP yesterday(2025 organic reduced to-3%to-5%from 0%to-2%)calling

3、 out macro uncertainty among other items as weighing on results and its outlook.There are company-specific factors to consider that make us cautious on a direct read-through to our coverage:for instance,WPP is a notable laggard in our new business tables YTD(e.g.Mars,Coca-Cola,Paramount),is in the p

4、rocess of a management transition and media agency restructuring,and has relatively greater exposure to the weaker performing creative discipline.We further note our call with Media Buyers on June 6 which indicated steady trading,and while conditions could have deteriorated over the final 3 weeks of

5、 the month,this wouldve run parallel to an overall improvement in macro sentiment.IPG and OMC guides were also given in mid-April during a volatile period and wouldve assumed a challenging economic outlook.Nonetheless,we find it prudent to trim our organic estimates,which remain above consensus.OMC

6、and IPG are trading at generational low valuations,with AI the primary concern.Since Q1 agency earnings began(4/15),OMC/IPG are down-5%/-1%respectively,underperforming the market at+16%;IPGs outperformance to OMC largely reflects the all-equity deal clearing an FTC antitrust review on June 23.On con