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Interpublic (IPG) Up 3.4% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Interpublic Group (IPG - Free Report) . Shares have added about 3.4% in that time frame, underperforming 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 the most recent earnings report in order to get a better handle on the important drivers.

Interpublic Beats on Q3 Earnings & Revenue Estimates

Interpublic reported solid third-quarter 2019 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate.

Adjusted earnings of 49 cents per share beat the consensus mark by a penny and improved on a year-over-year basis. Total revenues of $2.44 billion beat the consensus estimate by $366.3 million and increased 6.1% on a year-over-year basis. The top line benefited from organic revenue growth of 1.4% and positive impact from acquisitions of 8.6%, which were, however, partially offset by a negative impact of 1.3% due to foreign currency movement.

Net revenues of $2.06 billion increased 8.7% year over year.

Quarterly results were driven by solid performance across the company’s media, healthcare marketing, public relations, and sports & entertainment offerings. It witnessed contributions from a wide range of client sectors, which include healthcare, financial services, retail, tech and telecom, and consumer goods. While international markets remained strong, the company is fixing out the impact of certain account-specific headwinds in the United States.

Operating Results

Operating income in third-quarter 2019 came in at $280.3 million compared with $261.7 million in the prior-year quarter. Operating margin on net revenues declined to 13.6% from 13.8% in the year-ago quarter due to increased amortization expenses related to the acquisition of Acxiom. Operating margin on total revenues rose to 11.5% from 11.4% in the year-ago quarter.

Adjusted EBITA came in at $302 million compared with $277.8 million at the end of prior-year quarter. Adjusted EBITA margin on net revenues came in at 14.7%, flat year over year. Adjusted EBITA margin on total revenues rose to 12.4% from 12.1% in the year-ago quarter.

Total operating expenses of $2.16 billion declined 6% year over year.

Balance Sheet

As of Sep 30, 2019, Interpublic had cash and cash equivalents of $520.5 million compared with $614 million at the end of the prior quarter. Total debt was $3.62 billion compared with $3.77 billion at the end of the prior quarter.

Dividend Payout

During the reported quarter, the company declared and paid out 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.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, Interpublic has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, 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 B. 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 has been net zero. Notably, 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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