Interpublic (IPG) Tops Q4 Earnings & Revenue Estimates

The Interpublic Group of Companies, Inc. (NYSE:IPG) reported solid fourth-quarter 2018 results, wherein the company’s earnings and revenues surpassed the Zacks Consensus Estimate.

Adjusted earnings of 89 centsper share beat the Zacks Consensus Estimate by 8 cents and improved on a year-over-year basis. Net revenues of $2.41 billion beat the consensus estimate by $90.7 million and increased on a year-over-year basis. The top line benefited from organic revenue growth of 7.1% from and positive impact of 7.8% from acquisitions, which were, however, partially offset by a negative impact of 1.6% from foreign currency movement.

In the reported quarter, the company witnessed organic net revenue growth of 6.3% in the United States and 8% in international markets. Total revenues of $2.86 billion increased 10.3% year over year and includes $181.7 million in relation to the Acxiom acquisition (completed on Oct 1, 2018).The Acxiom acquisition will not impact organic revenue growth till the fourth quarter of 2019.

Over the past year, shares of Interpublic have declined 11.5% compared with 26.9% decline of the industry it belongs to. The Zacks S&P 500 composite however gained 1.9% in the said time frame.

Let’s check out the numbers in detail.

Operating Results

Operating income in fourth-quarter 2018 was $459.1 million, up 8.5% year over year. Operating margin on net revenues declined to 19% from 19.8% in the year-ago quarter.Operating margin on total revenues declined to 16.1% from 16.3% in the year-ago quarter.

Adjusted EBITA came in at $503.7 million compared with $428.3 million at the end of prior-year quarter. Adjusted EBITA margin on net revenues rose to 20.9% from 20.1% in the year-ago quarter.

Total operating expenses of $2.39 billion decreased 10.6% year over year.

Interpublic Group of Companies, Inc. (The) Price, Consensus and EPS Surprise

As of Dec 31, 2018, Interpublic had cash, cash equivalents and marketable securities of $673.5 million compared with $1,860.3 million at the end of prior quarter. Total debt was $3.73 billion compared with $3.34 billion at the end of prior quarter.

Share Repurchase and Dividend Payment

During 2018, Interpublic repurchased 5.1 million shares at an aggregate cost of $117.1 million and an average price of $23.03 per share. As a strategic move to reduce debt levels incurred in relation to the Acxiom acquisition, the company had suspended its share repurchase program as of Jul 2, 2018.

During 2018, the company paid four quarterly cash dividends for a total amount of $322.1 million. In the fourth quarter of 2018, the company declared and paid a cash dividend of 21 cents per share for a total of $80.5 million.

The company’s board of directors also declared a dividend of 23.5 cents per share, payable to shareholders of record on an ongoing quarterly basis.

2019 Outlook

Interpublic unveiled its full-year 2019 guidance. The company expects organic revenue growth of 2-3% and adjusted EBITA margin expansion of 40-50 basis points in 2019.

Zacks Rank & Upcoming Releases

Interpublic currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Investors interested in the broader Zacks Business Services sector are keenly awaiting fourth-quarter 2018 earnings reports of key players like IQVIA Holdings (NYSE:IQV) , Waste Management (NYSE:WM) and TransUnion (NYSE:TRU) — all of which are scheduled to report on Feb 14, before market open.

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