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Interpublic (IPG) Rides on Organic Growth & Acquisitions

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The Interpublic Group of Companies, Inc. IPG is currently riding on solid organic growth and strategic acquisitions, which are benefiting its top line.

Recently, the company reported solid fourth-quarter 2018 results, wherein the company’s earnings and revenues surpassed the Zacks Consensus Estimate. Adjusted earnings of 89 cents per share beat the consensus estimate by 8 cents and improved on a year-over-year basis. Net revenues of $2.41 billion beat the consensus mark by $90.7 million and increased on a year-over-year basis.

Over the past 60 days, the Zacks Consensus Estimate for first-quarter 2019 earnings has been revised 50% upward.

What’s Driving Interpublic?

Solid Business Model

Interpublic’s digital capabilities, diversified business model and geographic reach offer distinctive competitive advantage. The company is expected to achieve targeted levels in the upcoming quarters, based on diversification across emerging regions and collaboration/integration across agencies through technological improvement. It continues to look for investments/acquisitions to expand in high-growth regions and key global markets.

Robust Organic Growth

Interpublic’s top line continues to grow organically driven by growth across its major geographic regions and contributions from net client wins and net higher spending from existing clients (especially in the healthcare sector). In 2018, the company witnessed organic net revenue growth of 5.5%. Growth was 5.1% in the United States and 6.2% in international markets. This marks an improvement from organic net revenue increase of 1.5% in 2017, which includes 1.9% growth in the United States and 1.1% in international markets. For 2019, the company expects organic revenue growth of 2-3%.

Acquisitions: A Key Growth Catalyst

Interpublic has been continuously acquiring and investing in companies globally to expand its product portfolio and adapt to rapidly changing marketing services and the media market. In 2018, the company completed three acquisitions. These include the buyout of data-related and analytical services provider, Acxiom LLC in October; London-based social creative agency That Lot through its subsidiary, Weber Shandwick in July; and Brazil-based digital marketing and technology agency, Cappuccino in May. Full-year 2018 revenues include $181.7 million in relation to the Acxiom acquisition and a positive impact of 1.8% from net acquisitions.

In recent years, the company has acquired agencies across the marketing spectrum, which include firms specializing in digital, mobile marketing, social media, healthcare communications and public relations as well as agencies with full-service capabilities.

Zacks Rank & Other Stocks to Consider

Currently, Interpublic carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Some other top-ranked stocks in the broader Zacks Business Services sector are Robert Half RHI, Automatic Data Processing ADP and Insperity NSP. While Robert Half and Automatic Data Processing carry a Zacks Rank #2 (Buy), Insperity sports a Zacks Rank #1. Long-term expected EPS (three to five years) growth rate for Robert Half, Automatic Data Processing and Insperity is 8.4%, 13% and 18%, respectively.

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Interpublic Group of Companies, Inc. (The) (IPG) : Free Stock Analysis Report
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