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What's in Store for Interpublic (IPG) this Earnings Season?
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The Interpublic Group of Companies, Inc.(IPG - Free Report) is scheduled to report fourth-quarter 2016 results before the opening bell on Feb 10. Notably, over the trailing four quarters, the company delivered an average positive surprise of approximately 29.29%, beating estimates thrice.
New York-based Interpublic is one of the world’s leading providers of marketing and advertising services. It forms an integral part of the communication industry and is highly competitive in nature. Headwinds in the currency market have left investors a little edgy about what the quarter holds for them.
Factors to Influence Q4 Results
Interpublic derives a major portion of its revenues from outside the U.S. This exposes the company to foreign currency translation impacts particularly after the Brexit, posing a threat to its growth. The company is likely to be stifled by the renegotiated deals and restrictions imposed on trade with other European Union members. Brexit could further result in higher tariff and non-tariff barriers to trade between the U.K. and the European Union, lowering productivity of the company. In addition, the company also faces other risks like local legislation, monetary devaluation, exchange control restrictions and unstable political conditions, which may hamper revenue growth and impact its financial position.
The company faces concentration risks as it depends on a few significant customers for a large proportion of its revenues. A reduction in advertisement spending from any of the customers can significantly dent the company’s revenues. Moreover, constrained marketing budgets from big clients are expected to slow down organic growth and lead to account loss headwinds for Interpublic, going forward.
During the third quarter, the company acquired a U.K.-based company, Flipside. The acquisition is likely to impact the company’s top-line in the to-be-reported quarter.
However, Interpublic expects to strengthen its position with new business activities as well as opportunities from existing and new clients. Its impressive results in the past quarters were driven by revenue growth as well as successful cost streamlining initiatives. The company expects the growth momentum to continue, as it leverages new business wins to improve its growth outlook. The improving position of the agencies, whether in PR, healthcare communications, sports and entertainment, or interactive marketing gets industry recognition on a continuous basis. This augurs well for its long-term growth.
For 2016, the company updated its organic revenue growth expectations to 4–5% from 3–4% expected earlier, with operating margin improvement of 50 basis points or more over the previous year.
Earnings Whispers
Our proven model does not conclusively show that Interpublic will beat earnings this time. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below.
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at 0.00%.
Zacks Rank: Interpublic has a Zacks Rank #4 (Sell).
As it is we caution against stocks with a Zacks Rank #4 and #5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Interpublic Group of Companies, Inc. (The) Price and EPS Surprise
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Arch Coal, Inc. (ARCH - Free Report) has an Earnings ESP of +725% and a Zacks Rank #2.
Coeur Mining, Inc. (CDE - Free Report) has an Earnings ESP of +112.50% and a Zacks Rank #3.
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What's in Store for Interpublic (IPG) this Earnings Season?
The Interpublic Group of Companies, Inc.(IPG - Free Report) is scheduled to report fourth-quarter 2016 results before the opening bell on Feb 10. Notably, over the trailing four quarters, the company delivered an average positive surprise of approximately 29.29%, beating estimates thrice.
New York-based Interpublic is one of the world’s leading providers of marketing and advertising services. It forms an integral part of the communication industry and is highly competitive in nature. Headwinds in the currency market have left investors a little edgy about what the quarter holds for them.
Factors to Influence Q4 Results
Interpublic derives a major portion of its revenues from outside the U.S. This exposes the company to foreign currency translation impacts particularly after the Brexit, posing a threat to its growth. The company is likely to be stifled by the renegotiated deals and restrictions imposed on trade with other European Union members. Brexit could further result in higher tariff and non-tariff barriers to trade between the U.K. and the European Union, lowering productivity of the company. In addition, the company also faces other risks like local legislation, monetary devaluation, exchange control restrictions and unstable political conditions, which may hamper revenue growth and impact its financial position.
The company faces concentration risks as it depends on a few significant customers for a large proportion of its revenues. A reduction in advertisement spending from any of the customers can significantly dent the company’s revenues. Moreover, constrained marketing budgets from big clients are expected to slow down organic growth and lead to account loss headwinds for Interpublic, going forward.
During the third quarter, the company acquired a U.K.-based company, Flipside. The acquisition is likely to impact the company’s top-line in the to-be-reported quarter.
However, Interpublic expects to strengthen its position with new business activities as well as opportunities from existing and new clients. Its impressive results in the past quarters were driven by revenue growth as well as successful cost streamlining initiatives. The company expects the growth momentum to continue, as it leverages new business wins to improve its growth outlook. The improving position of the agencies, whether in PR, healthcare communications, sports and entertainment, or interactive marketing gets industry recognition on a continuous basis. This augurs well for its long-term growth.
For 2016, the company updated its organic revenue growth expectations to 4–5% from 3–4% expected earlier, with operating margin improvement of 50 basis points or more over the previous year.
Earnings Whispers
Our proven model does not conclusively show that Interpublic will beat earnings this time. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for this to happen. This is not the case here as you will see below.
Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at 0.00%.
Zacks Rank: Interpublic has a Zacks Rank #4 (Sell).
As it is we caution against stocks with a Zacks Rank #4 and #5 (Sell-rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Interpublic Group of Companies, Inc. (The) Price and EPS Surprise
Interpublic Group of Companies, Inc. (The) Price and EPS Surprise | Interpublic Group of Companies, Inc. (The) Quote
Stocks that Warrant a Look
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Carbonite, Inc. , with an Earnings ESP of +100% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Arch Coal, Inc. (ARCH - Free Report) has an Earnings ESP of +725% and a Zacks Rank #2.
Coeur Mining, Inc. (CDE - Free Report) has an Earnings ESP of +112.50% and a Zacks Rank #3.
Just Released – Driverless Cars: Your Roadmap to Mega-Profits Today
In this latest Special Report, Zacks’ Aggressive Growth Strategist Brian Bolan explores a full-blown technological breakthrough in the making – autonomous cars. He also spotlights 8 stocks with tremendous gain potential to feed off this phenomenon. Click to see the stocks right now >>