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Interpublic Q3 Earnings Trump Estimates on Organic Growth

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The Interpublic Group of Companies, IncIPG earnings topped estimates for the third quarter in a row, as the reported earnings of 27 cents per share for third-quarter 2015 exceeded the Zacks Consensus Estimate of 24 cents and grew an impressive 28.6% year over year.

The Interpublic Group of Companies Inc. - Earnings Surprise | FindTheBest

Net income (excluding the impact of the loss on sales of businesses) came in at $110.2 million, an impressive 22.9% higher than the previous year. The remarkable earnings improvement was driven by impressive top-line growth as well as successful cost streamlining initiatives.

Revenues

Revenues for the quarter came in at $1,865.5 million, up 1.3% from the prior-year period and ahead of the Zacks Consensus Estimate of $1,821 million. The top-line growth was driven by an impressive 7.1% growth in organic revenues over the prior-year period. Net acquisitions impact on revenues was a positive 0.1%, while foreign currency translations had a negative effect on the top line to the extent of 5.9%.

Geographically, Interpublic saw an organic growth of 7.1% in the U.S., while organic revenues also grew 7.1% internationally.

The results benefited from solid contributions from a broad range of the company's creative, marketing services and media offerings.

Margins

Operating income grew 12% year over year to $191.9 million, driven by higher revenues and better cost management. Operating margin also improved 100 basis points to 10.3% versus 9.3% in the prior-year quarter.

Total operating expenses in the quarter came in at $1,673.6 million, up just 0.2% from $1,669.8 million in the prior-year quarter.

Balance Sheet

As of Sep 30, 2015, cash, cash equivalents and marketable securities stood at $881.2 million versus $1.67 billion as of Dec 31, 2014. Total debt was $1.75 billion at quarter-end, versus $1.73 billion at Dec 31, 2014.

Share Repurchase Program/Dividend

During the third quarter of 2015, the company repurchased 3.6 million shares for $70.3 million at an average price of $19.67 per share. Also, the company paid a dividend of 12 cents per share, for a total consideration of $48.7 million.

Outlook

Advertising companies are currently under pressure as major advertising spenders are reviewing their agency accounts. Pivotal Research estimates that media billings worth a whopping $30 billion are currently under review, indicating that advertising agencies will face new fee pressure as clients look to cut marketing costs.

However, sustained organic growth and consistent cost discipline are expected to buoy Interpublic's growth in the coming quarters. Also, the company is committed to enhancing shareholder wealth by regularly returning significant cash through share repurchases and dividend payouts.

For 2015, the company increased its guidance and now expects organic revenue growth of over 5%, up from its previous forecast of 4%-5% growth. Interpublic also raised its operating margin expansion target to 100 basis points compared to 2014.

Interpublic currently carries a Zacks Rank #4 (Sell). Interpublic competes with Harte-Hanks Inc. HHS , Publicis Groupe SA PUBGY and TubeMogul, Inc. TUBE , each carrying a Zacks Rank #2 (Buy).

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INTERPUBLIC GRP (IPG): Free Stock Analysis Report

PUBLICIS GP-ADR (PUBGY): Free Stock Analysis Report

HARTE-HANKS INC (HHS): Free Stock Analysis Report

TUBEMOGUL INC (TUBE): 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 Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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