The Interpublic Group of Companies, Inc. IPG has long-term expected earnings per share (three to five years) growth rate of 4.7%. Moreover, earnings are expected to register 1.6% growth in 2019 and 7.4% in 2020.
Factors Driving Interpublic
Interpublic’s digital capabilities, diversified business model and geographic reach offer distinct competitive advantage. This advertising and marketing 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 investment opportunities and acquisitions to expand in high-growth regions and key global markets.
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). The company witnesses organic growth in the United States backed by media and advertising disciplines. Strong performance of advertising and media businesses in Continental Europe, Latin America and the U.K. regions also boost organic growth. In the first half of 2019, organic net revenue growth was 4.6% with 3% growth in the United States and 7.1% in international markets.
Interpublic has been continuously acquiring and investing in companies globally to expand product portfolio as well as adapt to rapidly changing marketing services and the media market. In the first half of 2019, the company acquired a content communications agency based in the U.K. In the first six months of 2019, net acquisitions had a positive impact of 8.9% on Interpublic's top line growth.
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.
Client/customer concentration can be a major hindrance to Interpublic’s business. The company’s client base includes some of the most popular companies and brands throughout the world. The company’s cash position is affected by seasonality in business. Global presence makes it vulnerable to foreign currency exchange rate fluctuations. High debt may limit the company’s future expansion and worsen its risk profile.
Zacks Rank & Stocks to Consider
Interpublic currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the broader Zacks Business Services sector are Visa V, Huron Consulting HURN and Accenture ACN, each carrying a Zacks Rank #2 (Buy). Long-term expected EPS (three to five years) growth rate for Visa, Huron Consulting and Accenture is 16.5%, 13.5% and 10.3%, respectively.
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