Tags: Interpublic | big | advertisers | IPG

Interpublic Gains from Big Budget Advertisers

By    |   Tuesday, 27 Dec 2011 07:49 PM

Interpublic Group of Cos. (IPG) owns one of the largest collections of advertising and marketing agencies anywhere and has a client list to match, including the world's big budget advertisers.

With agencies in more than 100 countries, Interpublic is poised to benefit from business growth just about anywhere it happens. For example, Interpublic has gained from growing consumerism in emerging markets such as Brazil and Dubai, where it has acquired marketing firms.

Many corporations still budget cautiously for marketing, but business conditions for the Interpublic family of agencies has improved significantly since a downturn in 2009, thanks largely to its biggest clients. Interpublic's leading sources of client revenue in 2010 were first-ranked General Motors (GM), followed by names such as Johnson & Johnson (JNJ) and Microsoft (MSFT).

The company almost matched its earnings in 2010 during the first three quarters of 2011. Net income in the nine months ended Sept. 30 jumped to $261 million, or 50 cents per share from $76 million or 11 cents per share during the same period last year. Revenue in the nine months rose, year over year, to $4.94 billion from $4.50 billion.

Interpublic has been recovering from the financial beating it took in 2009. Revenue in 2009 plunged by almost $1 billion from the 2008 level under the weight of economic recession and financial crisis. The company earned $271 million in 2010, about three times more than the $93 million it reported in 2009.

The New York City holding company had 41,000 employees, including 18,000 in the United States, at the end of 2010. The company's web site lists 85 subsidiaries. Among its principal subsidiaries are agencies operating under the brand names Draftcfb, Lowe, and McCann Erickson Advertising.

Interpublic has subsidiaries with a special focus on digital media. But the company also has deployed expertise in online marketing and related fields throughout its subsidiaries, rather than relegating it to a stand-alone function.

Facebook investor

The company also has acquired equity stakes in digital media businesses. Interpublic, for example, is a major investor in privately held Facebook. The company sold half of its equity interest in Facebook last August and recorded a pre-tax profit of $132 million on the transaction. Interpublic also announced on the same day that its board of directors approved a $150 million increase in the size of a stock repurchase program, to $450 million.

Interpublic is returning cash to shareholders through dividends as well. The company this year resumed quarterly dividend payments at a rate of 6 cents per share. It had stopped paying dividends from the fourth quarter of 2002 through the fourth quarter of 2010.

Most stock analysts following Interpublic in late December recommended buying, but about one in three had a neutral hold rating on the company's shares.

Interpublic negotiated a $450 billion increase in its senior unsecured revolving credit facility to $1 billion this year, and Standard & Poor's analysts Michael Altberg and Heather M. Goodchild responded by assigning a "BB+" credit rating to the credit facility. The company's "BB+" corporate rating remained unchanged.

"Upgrade potential for IPG hinges on progress toward peer-level EBITDA (cash profit) margins," Altberg and Goodchild said in their report on the company. Margin improvement, in turn, "will entail consistent momentum in new business wins, market share gains, and positive organic revenue growth."

Interpublic will release its next quarterly earnings report around Feb. 24.

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Interpublic Group of Cos. (IPG) owns one of the largest collections of advertising and marketing agencies anywhere and has a client list to match, including the world's big budget advertisers. With agencies in more than 100 countries, Interpublic is poised to benefit from...
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2011-49-27
Tuesday, 27 Dec 2011 07:49 PM
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