Interpublic Group of Companies Inc. (IPG) reported disappointing third quarter 2012 (ended September 30, 2012) results. Earnings for the quarter were 15 cents per diluted share, a decline of 62.5% from the 40 cents reported in the third quarter 2011.
However, the earnings for the third quarter 2011 were 16 cents excluding the effect of the Facebook transaction, which involved the sale of almost half of IPG’s holding in Facebook Inc. (FB).
The results were marginally short of the Zacks Consensus Estimate of 17 cents.
Revenue: Revenue dropped 3.2% year over year to $1,670.4 million from $1,726.5 million in the third quarter 2011, with a 5.5% sales decline in the U.S. Also, a 0.15% decline was registered internationally. Revenue in the quarter missed the Zacks Consensus Estimate of $1,709.0 million by 2.2%.
Organic revenue decreased 0.9% during the quarter, while foreign currency translations had a negative impact of 3.1%. These were partially offset by 0.8% contribution from acquisitions.
Margin: Operating income was recorded at $131.4 million, compared with $173.2 million in the year-ago period. Operating expenses in the quarter went down 0.9% to $1,539.0 million. This included a decrease of 2.2% in salaries and related expenses and increase of 2.0% in office and general expenses. Operating margin in the quarter was 7.9%, compared with 10.0% in the year-ago quarter.
Balance Sheet: Exiting the third quarter, the company’s cash and cash equivalents and marketable securities amounted to $1.20 billion, compared with $1.51 billion in the previous quarter, a decline of 20.5%. Total debt was recorded at $1.68 billion, compared with $1.63 billion in the preceding quarter.
Share Repurchase Program/Dividend: During the third quarter of 2012, the company repurchased 7.6 million shares at an aggregate cost of $83.2 million and an average price of $10.94 per share. Dividends paid during the quarter amounted to $25.8 million, or roughly 6 cents per share.
The company is the third largest advertising company in the world, offering a range of advertising and marketing communication services. The company competes with other industry players, such as Omnicom Group Inc. (OMC) Publicis Groupe SA (PUBGY) and WPP plc (WPPGY).
We currently maintain a long-term Neutral recommendation on the stock. The company holds a Zacks #3 Rank, which translates into a short-term (1-3 months) Hold rating.
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