Interpublic (IPG) Beats Q1 Earnings Estimates, Revenues Miss

The Interpublic Group of Companies, Inc. (NYSE:IPG) reported first-quarter 2017 results with GAAP earnings of $21.5 million or 5 cents per share, up from $5.4 million or 1 cent per share in the year-earlier quarter. The year-over-year increase was primarily due to higher revenues. Earnings comfortably beat the Zacks Consensus Estimate of 2 cents.

Revenues

Revenues for the reported quarter were $1,753.9 million, up 0.7% from the prior-year period. The year-over-year increase was driven by 2.7% growth in organic revenues over the prior-year period despite a negative foreign currency translation effect of 1%. Net divestures negatively impacted revenues by 1%. Quarterly revenues missed the Zacks Consensus Estimate of $1,761 million.

Geographically, Interpublic saw organic growth of 2.9% in the U.S. and 2.2% in the international markets. The rise was triggered by new business wins and strength in all geographic regions, led by a notable performance in the domestic market.

Margins

Operating income increased to $29.7 million from $23 million in first-quarter 2016, driven by better cost-management efforts. Operating margin also improved to 1.7% from 1.3% in the prior-year quarter. Operating margin increased 40 basis points (bps) from the prior-year quarter. Total operating expenses in the quarter were $1,724.2 million, up 0.3% year over year, due to higher salary expenses.

Balance Sheet

As of Mar 31, 2017, cash, cash equivalents and marketable securities were $778.1 million compared with $680.3 million in the year-ago period. Total debt was $1.92 billion as of Mar 31, 2017.

Share Repurchase/Dividend

During the first quarter, the company repurchased 2.3 million shares for $55 million.

Interpublic paid a dividend of 18 cents per share for a total consideration of $70.9 million during the reported quarter.

Outlook

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, ABM Industries Incorporated (NYSE:ABM) and Genpact Limited (NYSE:G) . JCDecaux sports a Zacks Rank #1 (Strong Buy), whereas ABM Industries and Genpact carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

JCDecaux has a long-term earnings growth expectation of 2.8% and is currently trading at a forward P/E of 25.3x.

ABM Industries has a long-term earnings growth expectation of 9% and is currently trading at a forward P/E of 22.6x.

Genpact has a long-term earnings growth expectation of 12.5% and is currently trading at a forward P/E of 16.9x.

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