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Interpublic (IPG) Gains on Buyouts, High Debt a Concern
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The Interpublic Group of Companies, Inc. (IPG - Free Report) possesses a distinctive competitive advantage, courtesy of its digital capabilities, diversified business model and geographic reach. Buyouts and strategic investments continue to act as key growth catalysts for the company.
In July, the New York-based advertising and marketing services provider delivered decent second-quarter 2018 results, wherein earnings met the Zacks Consensus Estimate and revenues beat the same.
Adjusted earnings per share (EPS) of 43 cents came in line with the Zacks Consensus Estimate and surged 43.3% year over year. Total revenues of $2.39 billion surpassed the consensus mark by $486.4 million and improved 9.4% year over year.
So far this year, shares of Interpublic have gained 12.9%, against the industry’s decline of 5.8%.
Acquisitions: A Key Growth Strategy
Acquisitions have been enabling Interpublic to cater to the rapidly changing marketing services and media prospects. In recent years, the company has acquired agencies across the marketing spectrum, which includes firms specialized in digital, mobile marketing, social media, healthcare communications and public relations as well as agencies with full-service capabilities.
So far this year, Interpublic completed two acquisitions — Brazil-based digital marketing and technology agency Cappuccino and London-based social creative agency That Lot — through its subsidiary Weber Shandwick. It has inked a deal to purchase the Acxiom Marketing Solutions (“AMS”) business from Arkansas-based database marketing company — Acxiom Corporation.
Interpublic Group of Companies, Inc. (The) Revenue (TTM)
The company continues to invest strategically to expand presence in high-growth geographic regions. In the recent years, it has made significant investments in Russia, Brazil, India and China to strengthen its foothold in the developing markets. The company holds a majority stake in the Middle East Communication Networks (“MCN”). Furthermore, the buyout of Cappuccino should is expected to help Weber Shandwick strengthen its position across Latin America.
Risks
Interpublic’s balance sheet is highly leveraged. As of Jun 30, 2018, total debt was $2.04 billion against a cash, cash equivalents and marketable securities balance of $493.3 million. Such a cash position indicates that Interpublic needs to generate adequate amount of operating cash flow to service its debt. Also, high debt limits the company’s future expansion and may worsen risk profile.
In fact, the company’s cash position is affected by seasonality in business. This is because of clients’ fluctuating annual media spending budgets and changing media spending patterns which varies throughout the year in different localities. Seasonality is observed in the first nine months of a year and makes a major impact in the first quarter.
The long-term expected EPS (three to five years) growth rate for Genpact, WEX and Total System Services is 10%, 15% and 14.6%, respectively.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
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Interpublic (IPG) Gains on Buyouts, High Debt a Concern
The Interpublic Group of Companies, Inc. (IPG - Free Report) possesses a distinctive competitive advantage, courtesy of its digital capabilities, diversified business model and geographic reach. Buyouts and strategic investments continue to act as key growth catalysts for the company.
In July, the New York-based advertising and marketing services provider delivered decent second-quarter 2018 results, wherein earnings met the Zacks Consensus Estimate and revenues beat the same.
Adjusted earnings per share (EPS) of 43 cents came in line with the Zacks Consensus Estimate and surged 43.3% year over year. Total revenues of $2.39 billion surpassed the consensus mark by $486.4 million and improved 9.4% year over year.
So far this year, shares of Interpublic have gained 12.9%, against the industry’s decline of 5.8%.
Acquisitions: A Key Growth Strategy
Acquisitions have been enabling Interpublic to cater to the rapidly changing marketing services and media prospects. In recent years, the company has acquired agencies across the marketing spectrum, which includes firms specialized in digital, mobile marketing, social media, healthcare communications and public relations as well as agencies with full-service capabilities.
So far this year, Interpublic completed two acquisitions — Brazil-based digital marketing and technology agency Cappuccino and London-based social creative agency That Lot — through its subsidiary Weber Shandwick. It has inked a deal to purchase the Acxiom Marketing Solutions (“AMS”) business from Arkansas-based database marketing company — Acxiom Corporation.
Interpublic Group of Companies, Inc. (The) Revenue (TTM)
Interpublic Group of Companies, Inc. (The) Revenue (TTM) | Interpublic Group of Companies, Inc. (The) Quote
Investments in Developing Markets
The company continues to invest strategically to expand presence in high-growth geographic regions. In the recent years, it has made significant investments in Russia, Brazil, India and China to strengthen its foothold in the developing markets. The company holds a majority stake in the Middle East Communication Networks (“MCN”). Furthermore, the buyout of Cappuccino should is expected to help Weber Shandwick strengthen its position across Latin America.
Risks
Interpublic’s balance sheet is highly leveraged. As of Jun 30, 2018, total debt was $2.04 billion against a cash, cash equivalents and marketable securities balance of $493.3 million. Such a cash position indicates that Interpublic needs to generate adequate amount of operating cash flow to service its debt. Also, high debt limits the company’s future expansion and may worsen risk profile.
In fact, the company’s cash position is affected by seasonality in business. This is because of clients’ fluctuating annual media spending budgets and changing media spending patterns which varies throughout the year in different localities. Seasonality is observed in the first nine months of a year and makes a major impact in the first quarter.
Zacks Rank & Key Picks
Currently, Interpublic carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the broader Business Services Sector include Genpact Ltd. (G - Free Report) , WEX Inc. (WEX - Free Report) and Total System Services, Inc. , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The long-term expected EPS (three to five years) growth rate for Genpact, WEX and Total System Services is 10%, 15% and 14.6%, respectively.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>