Will Currency Headwinds Hit Interpublic's (IPG) Q1 Earnings? - Analyst Blog
The Interpublic Group of Companies, Inc. IPG is scheduled to report its first-quarter 2015 results before the opening bell on Apr 24.
Interpublic has met earnings expectations in three of the last four quarters and beat estimates in one. Let’s have a look at how things are shaping up for the upcoming first-quarter results.
Growth Factors in the Past Quarter
Interpublic is one of the leading players of the intensely competitive communications industry. Agencies and media services compete with other agencies and creative or media services providers to maintain existing client relationships and win new clients. Any loss of an existing media services contract leads to significant loss of revenues for the company.
Interpublic, like other major advertising players, is facing an accelerated migration of advertising budgets to online platforms. Moreover, a sluggish global economic environment remains a drag on revenues as it drives companies to be cautious with regard to advertising and marketing outlay, thereby squeezing advertising budgets. These factors could negatively impact Interpublic’s top-line growth.
In the present scenario of ever-intensifying competition from ad technology companies who are contending for brand advertising dollars, Interpublic is striving to retain its market share. However, its impressive digital capabilities, diversified business model and geographic reach offer a distinctive competitive advantage to its clients.
The company’s enhanced business execution and successful cost-out actions have resulted in margin improvement, and will likely boost the company’s bottom line in the upcoming earnings report as well.
On the other hand, Interpublic derives a major portion of its revenues from outside the U.S. This exposes the company to foreign currency translation impacts and poses a threat to the earnings of the company. Strong dollar appreciation and prevailing uncertainty over future monetary policy are likely to have an adverse effect on the company’s results.
Earnings Whispers
Our proven model does not conclusively show that Interpublic is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below:
Zacks ESP: Earnings ESP for Interpublic is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 4 cents.
Zacks Rank: Interpublic’s Zacks Rank #3 (Hold), when combined with a 0.00% ESP, makes surprise prediction difficult. We caution against stocks with Zacks #4 and #5 Ranks (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Other Stocks That Warrant a Look
Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Ingersoll-Rand Plc IR has an Earnings ESP of +3.23% and carries a Zacks Rank #3. It is scheduled to report results on Apr 23.
BJ's Restaurants, Inc. BJRI has an Earnings ESP of +7.14% and holds a Zacks Rank #2 (Buy). It is scheduled to report results on Apr 23.
Heritage-Crystal Clean, Inc HCCI has an Earnings ESP of +33.33% and carries a Zacks Rank #3. It is scheduled to report results on Apr 29.
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