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Will Higher Revenues Drive Interpublic's (IPG) Q4 Earnings?

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The Interpublic Group of Companies, Inc. (IPG - Free Report) is scheduled to report fourth-quarter 2017 results before the opening bell on Feb 14. The company’s Integrated Agency Networks (“IAN”) segment, which constitutes the major portion of total revenues, is anticipated to generate higher revenues in the quarter.

Whether this will lead to higher earnings remains to be seen.

Top-Line Improvement

Interpublic is poised to grow on the back of its strong digital capabilities, diversified business model and extensive geographic presence. The company is anticipated to achieve targeted levels in the quarter based on diversification across emerging regions along with collaboration and integration across agencies through technological improvement. Moreover, strategic investments and acquisitions to expand in key global markets are likely to translate into higher revenues.

The Group’s best-in-industry talent and tools are expected to offer optimal and affordable solutions, thus rendering an edge over its peers. The company’s cost-cutting efforts, continuous margin improvement, stronger balance sheet and better capital structure are anticipated to aid bottom-line growth in the to-be-reported quarter.

Notably, the quarter’s Zacks Consensus Estimate for revenues from the IAN segment is pegged at $1,874 million compared with $1,866 million recorded in the year-ago quarter. Revenues from the Constituency Management Group segment are anticipated to be $401 million compared with reported revenues of $399 million in the prior-year quarter. Revenues from the domestic markets are likely to maintain a flat trajectory at $1,255 million, while that from the international markets are expected to be $1,028 million compared with $1,006 million reported in the year-earlier quarter.

Other Key Factors

However, the company forms part of the communications industry, which is highly competitive in nature. Agencies and media services compete with other agencies and creative or media services providers to maintain existing client relationships and to win new clients. These are likely to pose challenges to its prospects.

Furthermore, constrained marketing budgets from big clients are anticipated to slow down organic growth and lead to account loss for Interpublic, which may hamper its financial position going forward. This apart, the company’s exposure to foreign currency translation impacts might reflect poorly on the upcoming quarterly results.

Our proven model does not conclusively show earnings beat for Interpublic this time around. 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. But that is not the case here as you will see below.

Zacks ESP: Earnings ESP for the company is -0.11%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Interpublic has a Zacks Rank #3. Although this increases the predictive power of ESP, we need to have a positive ESP to make us confident about an earnings surprise.

Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell-rated) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Stocks to Consider

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:

Verisk Analytics, Inc. (VRSK - Free Report) is scheduled to release fourth-quarter 2017 results on Feb 20. The company has an Earnings ESP of +2.59% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Ni Source (NI - Free Report) is expected to release fourth-quarter 2017 results on Feb 20. The company has an Earnings ESP of +1.45% and a Zacks Rank #3.

Dynegy is expected to release fourth-quarter 2017 results on Feb 22. The company has an Earnings ESP of +22.35% and a Zacks Rank #3.

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