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Interpublic (IPG) Beats Q4 Earnings on Organic Growth

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The Interpublic Group of Companies, Inc. (IPG - Free Report) reported healthy fourth-quarter 2016 results with GAAP earnings of $317.6 million or 78 cents per share, up from $260.3 million or 63 cents per share in the year-earlier quarter. The year-over-year increase was primarily due to higher revenues.

Excluding non-recurring items, adjusted earnings for the reported quarter were $303.6 million or 75 cents per share compared with $272.1 million or 66 cents per share in the prior-year quarter. The adjusted earnings for the reported quarter comfortably beat the Zacks Consensus Estimate of 66 cents.

For full year 2016, Interpublic recorded GAAP earnings of $608.5 million or $1.49 per share compared with $454.6 million or $1.09 per share in 2015. Adjusted earnings for 2016 were $556.9 million or $1.37 per share compared with $501.7 million or $1.21 per share in 2015.

Revenues

Revenues for the reported quarter were $2,264.5 million, up 3.1% from the prior-year period. Quarterly revenues marginally beat the Zacks Consensus Estimate of $2,260 million. The year-over-year increase in revenues was driven by 5.3% growth in organic revenues over the prior-year period despite a negative foreign currency translation effect of 2%. Net divestures negatively impacted revenues by 0.2%.

Geographically, Interpublic saw organic growth of 3.3% in the U.S. and 7.8% in the international markets. Results were triggered by new business wins and strength in all geographic regions, led by a notable performance in the domestic market. For full year 2016, the company recorded revenues of $7,846.6 compared with $7,613.8 million in 2015.

Margins

Operating income increased to $485.1 million from $456.4 million in fourth-quarter 2015, driven by better cost-management efforts. Operating margin also improved to 21.4% from 20.8% in the prior-year quarter. Total operating expenses in the quarter were $1,779.4 million, up 2.3% year over year, due to higher salary and other expenses.

Balance Sheet

As of Dec 31, 2016, cash, cash equivalents and marketable securities were $1.1 billion compared with $1.5 billion in the year-ago period. Total debt was $1.69 billion at year- end 2016 compared with $1.75 billion in the prior-year period.

Share Repurchase Program/Dividend

During the quarter, the company repurchased 4.8 million shares for $110 million at an average price of $22.90 per share, bringing its tally for 2016 to 13.3 million shares at an aggregate cost of $303.3 million and an average price of $22.76 per share. The company authorized a new share repurchase program to buy back shares worth $300 million.

Interpublic paid a dividend of 15 cents per share for a total consideration of $58.8 million during the reported quarter. For full year 2016, the company paid $238.4 million in dividends. For 2017, the company increased its quarterly dividend to 18 cents per share.

Moving Forward

For 2017, the company expects organic growth in the range of 3–4%, with a 50 bps improvement in operating margins.

Interpublic currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include JCDecaux SA (JCDXF - Free Report) , National CineMedia, Inc. (NCMI - Free Report) and Social Reality, Inc. (SRAX - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

JCDecaux has a long-term earnings growth expectation of 2.8% and is currently trading at a forward P/E of 28.3x.

P. H. Glatfelter has a long-term earnings growth expectation of 9% and is currently trading at a forward P/E of 27.0x.

Svenska Cellulosa has a long-term earnings growth expectation of 15% and is currently trading at a forward P/E of 5.4x.

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