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Why Is Interpublic (IPG) Up 11.1% Since Last Earnings Report?

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It has been about a month since the last earnings report for Interpublic Group (IPG - Free Report) . Shares have added about 11.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Interpublic due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Interpublic Tops Q1 Earnings & Revenue Estimates

Interpublic reported solid first-quarter 2020 results wherein earnings and revenues beat the Zacks Consensus Estimate.

Adjusted earnings of 11 cents per share beat the consensus mark by 22.2% but remained flat on a year-over-year basis. Net revenues of $1.97 billion beat the consensus estimate by 1.6% but decreased 16.5% on a year-over-year basis. The top line benefited from organic revenue growth of 0.3%, which was, however, partially offset by a negative impact of 1% due to foreign currency movement and 0.9% due to dispositions. Total revenues of $2.36 billion were flat year over year.

Operating Results

Operating income in first-quarter 2020 came in at $75.9 million compared with $50.2 million in the prior-year quarter. Operating margin on net revenues improved to 3.8% from 2.5% in the year-ago quarter. Operating margin on total revenues rose to 3.2% from 2.1% in the year-ago quarter.

Adjusted EBITA came in at $97.2 million compared with $103.6 million at the end of the prior-year quarter. Adjusted EBITA margin on net revenues declined to 4.9% from 5.2% in the year-ago quarter. Adjusted EBITA margin on total revenues rose to 4.1% from 2.1% in the year-ago quarter.

Total operating expenses of $2.28 billion declined 1.2% year over year.

Balance Sheet

As of Mar 31, 2020, Interpublic had cash and cash equivalents of $1.55 billion compared with $1.19 billion at the end of the prior quarter. Total debt was $4.22 billion compared with $3.33 billion at the end of the prior quarter.

Dividend Payout

During the reported quarter, the company declared and paid out a cash dividend of 25.5 cents per share amounting to $100 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -27.78% due to these changes.

VGM Scores

Currently, Interpublic has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Interpublic has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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