Analysts have been raising their estimates for Interpublic Group of Companies, Inc. (IPG) after the company delivered strong Q4 results in late February. Based on current Zacks Consensus Estimates, earnings per share are expected to grow 29% in 2011 and 25% in 2012.
The company is also optimistic about its outlook. Its board of directors recently initiated a regular quarterly dividend and a $300 million share repurchase program. It is a Zacks #2 Rank (Buy) stock.
Company Description
Interpublic Group of Companies, Inc. is one of the big four global advertising holding companies. It is headquartered in New York and has a market cap of $6.1 billion.
Fourth Quarter Results
Interpublic Group recently reported fourth quarter earnings per share of 36 cents, crushing the Zacks Consensus Estimate by 16%. It was a 50% increase over the same quarter in 2009.
Total revenue was up 11.7% with increases seen in all regions of the world. U.S. revenue was up a solid 13.1%.
Operating income surged 23.4% as the company was able to leverage its fixed expenses. For instance, its staff cost ratio, which is total salaries and related expenses as a percentage of total revenue, fell from 58.4% to 56.6%.
Estimates Rising
Analysts virtually unanimously raised their estimates following strong Q4 results. The Zacks Consensus Estimate for 2011 is $0.63, representing 29% growth over 2010 EPS.
The 2012 consensus estimate is $0.79, equating to 25% EPS growth.
Analysts have been consistently raising their estimates over the last several months as Interpublic Group has delivered three consecutive positive earnings surprises.
It is a Zacks #2 Rank (Buy) stock.
Returning Value to Shareholders
Following a strong 2010 and a positive outlook for 2011 and beyond, the company’s board of directors initiated a regular quarterly dividend of 6 cents payable on March 25, 2011. This equates to a dividend yield of 1.9%.
The board also authorized a share repurchase program of up to $300 million. The company expects to begin making purchases in the first quarter of 2011. The program has no expiration date.
Shares are trading at 19.6x forward earnings, a slight premium to the industry average of 18.6x. It has a PEG ratio of 1.5.
Its price to book ratio of 2.6 is in-line with its peers.
Todd Bunton is the Growth & Income Stock Strategist for Zacks.com.
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