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Why Is Interpublic (IPG) Down 39.1% Since Last Earnings Report?

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A month has gone by since the last earnings report for Interpublic Group (IPG - Free Report) . Shares have lost about 39.1% 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 Q4 Earnings & Revenue Estimates

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

Adjusted earnings of 88 cents per share beat the consensus mark by 6% but declined 1.1% on a year-over-year basis. Net revenues of $2.43 billion beat the consensus estimate by 1.8% and increased 0.8% on a year-over-year basis. The top line benefited from organic revenue growth of 2.9%, which was, however, partially offset by a negative impact of 1% due to foreign currency movement and 1.1% due to divestitures.

In the reported quarter, the company witnessed organic net revenue growth of 2.1% in the United States and 4.1% in international markets. Total revenues of $2.90 billion increased 1.6% year over year.

Operating Results

Operating income in fourth-quarter 2019 came in at $491.3 million compared with $459.1 million in the prior-year quarter. Operating margin on net revenues improved to 20.2% from 19% in the year-ago quarter. Operating margin on total revenues rose to 16.9% from 16% in the year-ago quarter.

Adjusted EBITA came in at $512.7 million compared with $503.7 million at the end of prior-year quarter. Adjusted EBITA margin on net revenues rose to 21.1% from 20.9% in the year-ago quarter. Adjusted EBITA margin on total revenues rose to 17.7% from 17.6% in the year-ago quarter.

Total operating expenses of $2.41 billion declined 0.6% year over year.

Balance Sheet

As of Dec 31, 2019, Interpublic had cash and cash equivalents of $1.19 billion compared with $520.5 million at the end of the prior quarter. Total debt was $3.33 billion compared with $3.62 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 $90.9 million.

2020 Outlook

Interpublic unveiled its 2020 guidance. The company expects organic revenue growth of 3% and EBITA margin expansion of 20 basis points.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions. The consensus estimate has shifted -28.57% due to these changes.

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 C. However, the stock was allocated a grade of A on the value side, putting it in the top 20% 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 #2 (Buy). We expect an above average return from the stock in the next few months.


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