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Why Is Interpublic (IPG) Up 4.1% Since the Last Earnings Report?
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It has been about a month since the last earnings report for Interpublic Group of Companies, Inc.(The) (IPG - Free Report) . Shares have added about 4.1% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Interpublic Beats Q4 Earnings on Organic Growth
Interpublic reported healthy fourth-quarter 2016 results with GAAP earnings of $317.6 million or $0.78 per share, up from $260.3 million or $0.63 per share in the year-earlier quarter. The year-over-year increase was primarily due to higher revenues.
Excluding non-recurring items, adjusted earnings for the reported quarter were $303.6 million or $0.75 per share compared with $272.1 million or $0.66 per share in the prior-year quarter. The adjusted earnings for the reported quarter comfortably beat the Zacks Consensus Estimate of $0.66.
For full year 2016, Interpublic recorded GAAP earnings of $608.5 million or $1.49 per share compared with $454.6 million or $1.09 per share in 2015. Adjusted earnings for 2016 were $556.9 million or $1.37 per share compared with $501.7 million or $1.21 per share in 2015.
Revenues
Revenues for the reported quarter were $2,264.5 million, up 3.1% from the prior-year period. Quarterly revenues marginally beat the Zacks Consensus Estimate of $2,260 million. The year-over-year increase in revenues was driven by 5.3% growth in organic revenues over the prior-year period despite a negative foreign currency translation effect of 2%. Net divestures negatively impacted revenues by 0.2%.
Geographically, Interpublic saw organic growth of 3.3% in the U.S. and 7.8% 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. For full year 2016, the company recorded revenues of $7,846.6 compared with $7,613.8 million in 2015.
Margins
Operating income increased to $485.1 million from $456.4 million in fourth-quarter 2015, driven by better cost-management efforts. Operating margin also improved to 21.4% from 20.8% in the prior-year quarter. Total operating expenses in the quarter were $1,779.4 million, up 2.3% year over year, due to higher salary and other expenses.
Balance Sheet
As of Dec 31, 2016, cash, cash equivalents and marketable securities were $1.1 billion compared with $1.5 billion in the year-ago period. Total debt was $1.69 billion at year- end 2016 compared with $1.75 billion in the prior-year period.
Share Repurchase Program/Dividend
During the quarter, the company repurchased 4.8 million shares for $110 million at an average price of $22.90 per share, bringing its tally for 2016 to 13.3 million shares at an aggregate cost of $303.3 million and an average price of $22.76 per share. The company authorized a new share repurchase program to buy back shares worth $300 million.
Interpublic paid a dividend of $0.15 per share for a total consideration of $58.8 million during the reported quarter. For full year 2016, the company paid $238.4 million in dividends. For 2017, the company increased its quarterly dividend to $0.18 per share.
Moving Forward
For 2017, the company expects organic growth in the range of 3–4%, with a 50 bps improvement in operating margins.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter In the past month, the consensus estimate has shifted by 10% due to these changes.
Interpublic Group of Companies, Inc. (The) Price and Consensus
At this time, Interpublic's stock has a strong Growth Score of 'A', though it is lagging a lot on the momentum front with a 'D'. 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.
Zacks' style scores indicate that the company's stock is suitable for value and growth investors.
Outlook
While estimates have been trending upward for the stock, the magnitude of this revision has been net zero. It comes with little surprise that the stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.
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Why Is Interpublic (IPG) Up 4.1% Since the Last Earnings Report?
It has been about a month since the last earnings report for Interpublic Group of Companies, Inc. (The) (IPG - Free Report) . Shares have added about 4.1% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Interpublic Beats Q4 Earnings on Organic Growth
Interpublic reported healthy fourth-quarter 2016 results with GAAP earnings of $317.6 million or $0.78 per share, up from $260.3 million or $0.63 per share in the year-earlier quarter. The year-over-year increase was primarily due to higher revenues.
Excluding non-recurring items, adjusted earnings for the reported quarter were $303.6 million or $0.75 per share compared with $272.1 million or $0.66 per share in the prior-year quarter. The adjusted earnings for the reported quarter comfortably beat the Zacks Consensus Estimate of $0.66.
For full year 2016, Interpublic recorded GAAP earnings of $608.5 million or $1.49 per share compared with $454.6 million or $1.09 per share in 2015. Adjusted earnings for 2016 were $556.9 million or $1.37 per share compared with $501.7 million or $1.21 per share in 2015.
Revenues
Revenues for the reported quarter were $2,264.5 million, up 3.1% from the prior-year period. Quarterly revenues marginally beat the Zacks Consensus Estimate of $2,260 million. The year-over-year increase in revenues was driven by 5.3% growth in organic revenues over the prior-year period despite a negative foreign currency translation effect of 2%. Net divestures negatively impacted revenues by 0.2%.
Geographically, Interpublic saw organic growth of 3.3% in the U.S. and 7.8% 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. For full year 2016, the company recorded revenues of $7,846.6 compared with $7,613.8 million in 2015.
Margins
Operating income increased to $485.1 million from $456.4 million in fourth-quarter 2015, driven by better cost-management efforts. Operating margin also improved to 21.4% from 20.8% in the prior-year quarter. Total operating expenses in the quarter were $1,779.4 million, up 2.3% year over year, due to higher salary and other expenses.
Balance Sheet
As of Dec 31, 2016, cash, cash equivalents and marketable securities were $1.1 billion compared with $1.5 billion in the year-ago period. Total debt was $1.69 billion at year- end 2016 compared with $1.75 billion in the prior-year period.
Share Repurchase Program/Dividend
During the quarter, the company repurchased 4.8 million shares for $110 million at an average price of $22.90 per share, bringing its tally for 2016 to 13.3 million shares at an aggregate cost of $303.3 million and an average price of $22.76 per share. The company authorized a new share repurchase program to buy back shares worth $300 million.
Interpublic paid a dividend of $0.15 per share for a total consideration of $58.8 million during the reported quarter. For full year 2016, the company paid $238.4 million in dividends. For 2017, the company increased its quarterly dividend to $0.18 per share.
Moving Forward
For 2017, the company expects organic growth in the range of 3–4%, with a 50 bps improvement in operating margins.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed an upward trend in fresh estimates. There has been one revision higher for the current quarter In the past month, the consensus estimate has shifted by 10% due to these changes.
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, Interpublic's stock has a strong Growth Score of 'A', though it is lagging a lot on the momentum front with a 'D'. 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.
Zacks' style scores indicate that the company's stock is suitable for value and growth investors.
Outlook
While estimates have been trending upward for the stock, the magnitude of this revision has been net zero. It comes with little surprise that the stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.