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Earnings Preview: Interpublic Group

Zacks Equity Research

The Interpublic Group of Companies, Inc. (IPG) will report its first-quarter 2012 earnings on Thursday, April 26, 2012.

The current Zacks Consensus Estimate for loss per share is 10 cents, representing an annualized decline of 4.29%.  

With respect to earnings surprises, over the trailing four quarters, IPG outperformed the Zacks Consensus Estimate in three quarters, while underperformed in one. The average earnings surprise was 22.43%, implying that the company has outperformed the Zacks Consensus Estimate by the same magnitude over the last four quarters.

Fourth-Quarter and Fiscal 2011 Highlights

On February 24, 2012, Interpublic Group of Companies Inc. reported financial results for the fourth quarter and fiscal 2011. For the fourth quarter, the company reported diluted earnings per share of 50 cents, a 39% increase from 36 cents recorded in the fourth quarter of 2010. The recorded EPS outshined the Zacks Consensus Estimate of 39 cents, driven by improved margins and organic revenue growth.

For full-year 2011, diluted earnings per share came in at 99 cents, (76 cents, excluding the benefit of Facebook transaction during the third quarter of 2011). The result showed a 62% increase compared to diluted earnings per share of 47 cents for full-year 2010

Revenue in the fourth quarter surged 3.4% year over year to $2,072.6 million, with 1% growth in the U.S. and 5.9% internationally. Revenue in the reported quarter marginally missed the Zacks Consensus Estimate of $2,075 million.

For FY11, the company reported total revenue of $7,014.6 million, up 7.8% y/y.

For further details please read: IPG Beats on Improved Margins

Agreement of Estimate Revisions   

In the last 30 days, one analyst increased the company’s EPS estimate for the first quarter of 2012 while four analysts decreased estimate for the same period. Moreover, for fiscal 2012, three analysts raised their estimate while three decreased the same. For fiscal 2013, three analysts raised their estimate in the last 30 days, while two lowered the same.

Magnitude of Estimate Revisions   

Despite revision, lack of magnitude kept the estimates intact over the last 30 days at loss of 10 cents per share for the first quarter of 2012, representing a year-over-year decline of 4.29%.

Earnings per share estimates for fiscal 2012 remained static at 82 cents over the last 30 days. For fiscal 2013, the similar static trend was maintained at 98 cents per share over a period of last 30 days. These estimates represented a year-over-year growth of 7.48% for 2012 and 20.54% for 2013.

Our Take   

We are cautious on the upcoming results based on intense pricing pressures witnessed worldwide in a fiercely competitive ad-world. Moreover, fluctuating global GDP tainted with rigorous client spending cuts as well as rising operating expense may lead to uncertainty. However, we are likely to see impressive results from the company’s new business investments in the upcoming quarters. This, we believe will be providing IPG an edge above its peers such as Omnicom Group Inc. (OMC), Publicis Groupe SA (PUBGY) and WPP plc (WPPGY).

We currently maintain a long-term ‘Outperform’ recommendation on the stock. Moreover, Omnicom carries a Zacks #2 Rank, which translates into a short-term (1-3 months) ‘Buy’ rating.

Read the Full Research Report on OMC

Read the Full Research Report on WPPGY

Read the Full Research Report on IPG

Read the Full Research Report on PUBGY

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