IPG Beats on Improved Margins - Analyst Blog

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On February 24, The Interpublic Group of Companies Inc. ( IPG ) reported its 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, (or 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

 

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.

 

Organic revenue growth in the quarter was 2.8%, attributable to revenue increase acrossmajor emerging markets and global networks.

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

Margin

 

Operating income was $385.3 million, up compared with $330.7 million in the year-ago period. Operating expenses in the quarter declined 0.8% to $1687.3 million. This included an increase of 0.1% in salaries and related expenses and a decline of 2.9% in office and general expenses. Operating margin in the quarter was 18.6% compared with 16.5% in the year-ago quarter.

For full-year 2011, operating margin improved to 9.8%, up from 8.4% recorded in the year-ago quarter.

 

Balance Sheet

 

Exiting the fourth quarter, the company's cash and cash equivalents and marketable securities amounted to $2.32 billion compared with $2.69 billion in the previous year quarter. Total debt was recorded at $1.77 billion compared with $1.74 billion in the preceding year quarter.

 

Dividend/Share Repurchase

During the fourth quarter of 2011, the company declared and paid a common stock cash dividend of 6 cents per share, for a total consideration of $26.7 million.  For FY11, the company declared and paid common stock cash dividends of 24 cents per share, for a total consideration of $111.1 million. The board of directors has also declared a common stock cash dividend of 6 cents per share, payable on March 23, 2012, to shareholders of record at the close of business as of March 9, 2012.

Moreover, the board of directors of the company has also authorized a new share repurchase program for repurchasing up to $300.0 million of IPG common stock from time to time. The program is in addition to any amount remaining for repurchase under the program announced in 2011.

Outlook

 

Management has targeted a 3% organic revenue growth and at least 50 basis points of operating margin improvement for 2012. 

New York-based, Interpublic Group of Companies Inc. together with its subsidiaries, provides advertising and marketing services worldwide.  The company directly competes with its peers, such as Omnicom Group Inc. ( OMC ), Publicis Groupe SA ( PUBGY ) and WPP plc ( WPPGY ).

  Interpublic Group has a Zacks #3 Rank, which translates into a short-term Hold rating (1-3 months).


 
INTERPUBLIC GRP ( IPG ): Free Stock Analysis Report
 
OMNICOM GRP ( OMC ): Free Stock Analysis Report
 
PUBLICIS GP-ADR ( PUBGY ): Free Stock Analysis Report
 
WPP GRP PLC ( WPPGY ): Free Stock Analysis Report
 
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: IPG , OMC , PUBGY , WPPGY

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