Can International Revenues Drive Interpublic's Q3 Earnings?

Can International Revenues Drive Interpublic's Q3 Earnings?

The Interpublic Group of Companies, Inc. IPG is scheduled to report third-quarter 2017 results on Oct 24. Last quarter, the company reported earnings of 27 cents, reflecting a miss of 20.6%. However, the company anticipates strong revenues in the quarter to be reportedin Integrated Agency Networks (IAN), which constitutes the major portion of total revenues.

Interpublic has a decent earnings surprise historybeating estimates thricein the trailing four quarters, with an average positive surprise of 38.44%.

Let’s see how things are shaping up prior to this announcement.

Factors to Consider

Interpublic is poised to grow on the back of its strong digital capabilities, diversified business model and extensive geographic presence. The company is anticipated to achieve targeted levels in the upcoming quarters based on diversification across emerging regions along with collaboration and integration across agencies through technological improvement. Moreover, strategic investments and acquisitions to expand in key global markets augur well for the company.

Going ahead, the company plans to focus on de-leveraging and improving its balance sheet as well asreducing effective cost of debt. The Group’s best-in-industry talent and tools are anticipatedto offer optimal and affordable solutions, thus rendering an edge over its peers.  The company’s efforts in reducing costs, continuous margin improvement, stronger balance sheet and better capital structure is anticipatedtoaidbottom-line growth in the to-be reported quarter.

Notably, the Zacks Consensus Estimate for revenues from the International markets in the to-be-reported quarter currently remains high at $762 million compared with second-quarter revenues of $724 million. Moreover, revenues from Constituency Management Group segment are also anticipated to be high with an estimate of $428 million compared with reported revenues of $347 million in the prior quarter.

Despite these positives, the fact remains that the company forms part of the communications industry, which is highly competitive in nature. Agencies and media services compete with other agencies and creative or media services providers to maintain existing client relationships and to win new clients. These are likely to pose challenges toits prospects.

Furthermore, constrained marketing budgets from big clients are anticipatedto slow down organic growth and lead to account loss for Interpublic, which may hamper its financial position going forward. This apart, the company’s exposure to foreign currency translation impacts might reflect poorly on the upcoming quarterly results.

Earnings Whispers

Our proven model does not conclusively show an earnings beat for Interpublic this time around. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.

Zacks ESP: Earnings ESP for the company is 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 33 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter .

Interpublic Group of Companies, Inc. (The) Price and EPS Surprise

Interpublic Group of Companies, Inc. (The) Price and EPS Surprise | Interpublic Group of Companies, Inc. (The) Quote

Zacks Rank: Interpublic has a Zacks Rank #3, which increases the predictive power of the ESP. However, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Brink’s Company (The) BCO has an Earnings ESP of +23.44% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Gartner, Inc. IT has an Earnings ESP of +5.36% and a Zacks Rank #2.

ManpowerGroup MAN has an Earnings ESP of +4.50% and a Zacks Rank #2.

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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.

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