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Interpublic (IPG) Down 9.7% Since Last Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Interpublic Group (IPG - Free Report) . Shares have lost about 9.7% in that time frame, underperforming the S&P 500.

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

Interpublic Tops Q2 Earnings & Revenue Estimates

Interpublic reported solid second-quarter 2019 results, wherein the company’s earnings and revenues surpassed the Zacks Consensus Estimate.

Adjusted earnings of 46 cents per share beat the Zacks Consensus Estimate by 2 cents and improved on a year-over-year basis. Total revenues of $2.52 billion beat the consensus estimate by $397.4 million and increased 5.4% on a year-over-year basis. The top line benefited from organic revenue growth of 3% and positive impact of 8.5% attributable to acquisitions, which were, however, partially offset by a negative impact of 2.4% due to foreign currency movement.

In the reported quarter, the company witnessed organic net revenue growth of 0.6% in the United States and 6.5% in international markets, driven by a combination of net client wins and net higher spending from existing clients. Net revenues of $2.13 billion increased 9.1% year over year.

Operating Results

Operating income in second-quarter 2019 came in at $264.2 million compared with $249.2 million in the prior-year quarter. Operating margin on net revenues decreased to 12.4% from 12.8% in the year-ago quarter due to increased amortization expenses related to the acquisition of Acxiom. Operating margin on total revenues rose to 10.5% from 10.4% in the year-ago quarter.

EBITA came in at $285.5 million compared with $254.4 million at the end of prior-year quarter. EBITA margin on net revenues rose to 13.4% from 13.1% in the year-ago quarter.

Total operating expenses of $2.26 billion decreased 5.3% year over year.

Balance Sheet

As of Jun 30, 2019, Interpublic had cash and cash equivalents of $614 million compared with $630.5 million at the end of the prior quarter. Total debt was $3.77 billion compared with $3.94 billion at the end of the prior quarter.

Dividend Payment

During the reported quarter, the company declared and paid a cash dividend of 23.5 cents per share amounting to $90.8 million.

2019 Outlook

Interpublic reaffirmed its full-year 2019 guidance. The company continues to expect organic revenue growth of 2-3% and adjusted EBITA margin expansion of 40-50 basis points in 2019.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a downward path over the past two months.

VGM Scores

At this time, Interpublic has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

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

Outlook

Interpublic has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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