A month has gone by since the last earnings report for The Interpublic Group of Companies, Inc. (NYSE:IPG) . Shares have lost about 6% in that time frame.
Will the recent negative trend continue leading up to its next earnings release, or is IPG 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 Beats Q4 Earnings on Modest Organic Growth
Interpublic reported fourth-quarter 2017 GAAP earnings of $316.6 million or 81 cents per share, slightly down from $317.6 million or 78 cents per share in the year-earlier quarter. The year-over-year increase in earnings per share despite lower net income was primarily due to lower outstanding shares due to share repurchases.
Excluding non-recurring items, adjusted earnings for the reported quarter were 79 cents per share compared with 75 cents in the year-ago quarter and exceeded the Zacks Consensus Estimate of 77 cents. For full year 2017, adjusted earnings were $1.41 per share compared with $1.39 in 2016.
Inside the Headlines
Revenues for the reported quarter were $2,341 million, up 3.4% from the prior-year period and exceeded the Zacks Consensus Estimate of $2,273 million. The top-line growth was driven a 3.3% year-over-year growth in organic revenues with a positive foreign currency translation effect of 1.2%. Net divestitures negatively impacted revenues by 1.1%. For full year 2017, revenues were $7,882.4 million compared with $7,846.6 million in 2016.
Interpublic experienced an organic growth of 3.7% in the United States and 2.9% in the international markets. Geographically, the company reported revenues of $1,286 million in the United States, up 2.2% and $1,055 million in international markets, up 4.9% year over year.
Margins
Operating income increased to $518.3 million, compared with $485.7 million in fourth-quarter 2016, driven by better cost-management efforts. Operating margin also improved to 22.1% from 21.4% in the prior-year quarter. Total operating expenses in the quarter were $1,822.7 million, up 2.5% year over year.
Balance Sheet
As of Dec 31, 2017, cash, cash equivalents and marketable securities were $791 million compared with $1.1 billion as of Dec 31, 2016. Total debt was $1.4 billion at year-end 2017 compared with $1.7 billion in the year-ago period.
Share Repurchase Program
During fourth-quarter 2017, the company repurchased 4.2 million shares at an average price of $19.85 per share, bringing the tally for the year to 13.7 million shares at an average price of $21.97 per share. Management authorized an additional new share repurchase program worth $300 million.
Dividend Hike
Interpublic paid a dividend of 18 cents per share for a total consideration of $69.8 million during the reported quarter. The company raised its quarterly dividend by 16.7% year over year to 21 cents per share.
Moving Forward
For 2018, Interpublic aims to have organic revenue growth of 2% to 3% and operating margin expansion of 20 basis points with continued investments in key areas such as digital, data, and analytics. Interpublic is poised to grow on the back of its strong digital capabilities, diversified business model and extensive geographic presence. The company is anticipated to achieve targeted levels in the upcoming quarters based on diversification across emerging regions along with collaboration and integration across agencies through technological improvement. Moreover, strategic investments and acquisitions to expand in key global markets augur well.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a flat path over the past month.
Interpublic Group of Companies, Inc. (The) Price and Consensus
Interpublic Group of Companies, Inc. (The) Price and Consensus | Interpublic Group of Companies, Inc. (The) Quote
VGM Scores
At this time, IPG has a nice Growth Score of B, though it is lagging a bit on the momentum front with a C. However, the stock was allocated a grade of A on the value side, putting it in the top quintile 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.
Based on our scores, the stock is primarily suitable for value investors while also being suitable for those looking for growth and to a lesser degree momentum.
Outlook
IPG has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Interpublic Group of Companies, Inc. (The) (IPG): Free Stock Analysis Report
Original post
Zacks Investment Research