Interpublic Group Of Companies, Inc. (IPG - Analyst Report) is scheduled to report third-quarter 2016 results before the opening bell on Oct 21. Notably, over the trailing four quarters, the company delivered an average positive surprise of approximately 29.74%, beating estimates thrice.
New York-based Interpublic is one of the world’s leading providers of marketing and advertising services. Interpublic is 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 Q3 Results
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.
During the quarter, the company acquired a U.K.-based company, Flipside. The acquisition enables Weber Shandwick deliver a fully integrated, modern digital offering that will be profitable for both B2C and B2B marketers. Flipside’s expertise will bolster Weber Shandwick's leading position in the industry.
However, 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.
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 ESPand 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 #3, which along with a 0.00% ESP makes an earnings beat unlikely this season.
Note that, we caution against stocks with a Zacks Rank #4 and #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
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:
Amazon.com, Inc. (AMZN - Analyst Report) , with an Earnings ESP of +6.98% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Parker-Hannifin Corporation (PH - Analyst Report) has an Earnings ESP of +0.64% and a Zacks Rank #3. It is scheduled to report its results on Oct 21.
Synergy Resources Corporation (SYRG - Snapshot Report) has an Earnings ESP of +100% and a Zacks Rank #3. It is expected to release results on Oct 20.
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