Interpublic Group of Companies, Inc. (IPG) reported disappointing results on April 20 for the first quarter of 2010 with a loss per share of 15 cents. It missed the Zacks Consensus Estimate by 2 cents. During the past month, shares have fallen by approximately 14%. However, this was a penny better than the same quarter last year’s loss per share of 16 cents.
Earnings Report Review
Total revenues grew 1.2% to $1,341.3 million, up from $1,325.3 million in the same period of fiscal 2009 based on the improvement in economic conditions. Revenues generated from United States, which contributes 60% of total revenues, bloated 2.8% to $803.1 million, while International revenues dropped 1% to $538.2 million.
(Read our full coverage on this earnings report: Interpublic Group Reports Losses)
Earnings Estimate Revisions – Overview
Although the results were below par, analysts have raised their estimates by a couple of pennies based on the slight improvement in economic conditions, which they believe will enhance organic revenues in the near term. The earnings estimate details are discussed below.
Agreement of Analysts
Organic revenue growth together with cost-containment measures will pull it through the challenging economic environment, and position it for future growth and profitability.
As a result, for FY2010, out of 15 analysts covering the stock, 11 have raised their estimates since the earnings release, while only 1 analyst moved in the opposite direction. Looking out to FY2011, 9 analysts have raised their earnings estimates, while 2 have lowered them.
Magnitude of Estimate Revisions
Earnings estimates nudged up 2 cents from 35 to 37 cents since the earnings announcement. For 2011, it went up 3 cents from 48 to 51 cents, reflecting no clear direction in the intermediate term.
Interpublic Group in Neutral Lane
Interpublic Group continues to look for strategic investments that will help capitalize on the emerging markets. However, the company depends on a few significant customers for a large proportion of its revenues, which could substantially affect its business. Interpublic Group is exposed to exchange rate fluctuations, as a significant portion of its revenues are generated from international operations. However, the company’s cost containment initiative should help sustain as demand for marketing services gradually picks up in a broader recovery.
Given the marginal revisions in estimates, it is no surprise that Interpublic Group shares are maintaining a Zacks #3 Rank, which translates into a short-term Hold recommendation. Our long-term recommendation for the stock also remains middle of the road at Neutral until a substantial market recovery occurs.
About Earnings Estimate Scorecard
Len Zacks, PhD in mathematics from MIT, proved over 30 years ago that earnings estimate revisions are the most powerful force impacting stock prices. He turned this ground breaking discovery into two of the most celebrating stock rating systems in use today. The Zacks Rank for stock trading in a 1 to 3 month time horizon and the Zacks Recommendation for long-term investing (6+ months). These “Earnings Estimate Scorecard” articles help analyze the important aspects of estimate revisions for each stock after their quarterly earnings announcements. Learn more about earnings estimates and our proven stock ratings at http://www.zacks.com/education/
Read the full analyst report on “IPG”
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