Interpublic (IPG) Meets Q2 Earnings, Misses On Revenues

The Interpublic Group of Companies, Inc (NYSE:IPG) reported relatively modest second-quarter 2016 results with GAAP earnings of $156.9 million or 38 cent per share up from $121.2 million or 29 cents per share in the year-earlier quarter. The year-over-year increase in earnings was primarily due to higher revenues.

Adjusted income came in at $134.5 million or 33 cents per share. Adjusted earnings for second-quarter 2016 were in line with the Zacks Consensus Estimate.

Revenues

Revenues for the quarter were $1,917.9 million, up 2.2% from the prior-year period, but short of the Zacks Consensus Estimate of $1,934 million. The company recorded 3.7% growth in organic revenues over the prior year despite a negative foreign currency translation effect of 1.8%. However, net acquisitions positively impacted revenues by 0.3%.

Geographically, Interpublic saw organic growth of 4.6% in the U.S. and 2.3% in the international markets. Results were 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 $224.8 million from $215.8 million in second-quarter 2015, driven by better cost-management efforts. Operating margin also improved to 11.7% from 11.5% in the prior-year quarter. Total operating expenses in the quarter were $1,693.1 million, up 2% year over year.

Balance Sheet

As of Jun 30, 2016, cash, cash equivalents and marketable securities were $675.4 million compared with $855.6 million as of Jun 30, 2015. Total debt was $1.82 billion at quarter end versus $1.76 billion as of Dec 31, 2015.

Share Repurchase Program/Dividend

During the second quarter of 2016, the company repurchased 2.5 million shares for $58.8 million at an average price of $23.26 per share, bringing its tally for the first six months of the year to 5 million shares, at an aggregate cost of $112.5 million and an average price of $22.47 per share.

Interpublic paid a dividend of 15 cents per share for a total consideration of $60.2 million during the reported quarter.

Outlook

Interpublic reiterated its 2016 financial targets. For 2016, the company reaffirmed organic revenue growth of 3-4%, with 50 basis points of operating margin improvement over the previous year.

Interpublic currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks nclude YuMe, Inc. (NYSE:YUME) , Core-Mark Holding Company, Inc. (NASDAQ:CORE) and WageWorks, Inc. (NYSE:WAGE) . All three stocks carry a Zacks Rank #2 (Buy).