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IPG Projects Stronger Revenue Growth in 2018

IPG‘s better-than-expected results in the fourth quarter showed the advertising company may be turning the corner in a challenging marketing environment.


By

Alexandra Bruell

Interpublic Group of Co s. projected stronger revenue growth for 2018, after better-than-expected results in the fourth quarter showed the advertising company is successfully coping with the challenging marketing environment.

IPG, which owns agency networks McCann WorldGroup, MullenLowe Group and IPG Mediabrands, set a target for organic revenue growth of 2% to 3% this year, a slight improvement from the lackluster growth of 1.8% in 2017. In the advertising industry, organic revenue is a closely tracked metric that strips out foreign-exchange fluctuations, acquisitions and disposals.

On the ad holding company’s earnings call, IPG Chief Executive Michael Roth discussed how the unrest in the industry—such as changing consumer behaviors and marketers’ new business models—left clients cautious about spending in 2017. This year, he sees agencies benefiting from companies eager to grow their market share and possibly reinvest tax benefits.

“While the caution we saw through much of last year will not lift overnight, we expect to gradually put the slower revenue growth of 2017 behind us, and post improved growth this year,” Mr. Roth said.

IPG also raised its quarterly dividend by 17% to 21 cents a share and authorized a new stock buyback program of up to $300 million.

The company’s shares rose 12% in midday trading.

In the fourth quarter, IPG boosted its total revenue by 3.4% to $2.34 billion. Organic revenue increased 3.3%, exceeding analysts’ expectations.

Net income decreased slightly to $316.6 million, or 81 cents a share, from $317.6 million, or 78 cents a share, a year earlier. Excluding one-time items, adjusted earnings came in at 79 cents.

Analysts had expected adjusted earnings of 78 cents a share on revenue of $2.3 billion, according to FactSet.

Organic revenue growth in the quarter was 3.7% in the U.S., and 2.9% abroad. Total revenue growth was higher internationally at 4.9% versus 2.2% in the U.S.

While IPG gave a slightly rosier outlook for organic revenue growth this year, it still falls short of the company’s levels from several years ago. And the company gave only a modest forecast for margin expansion this year, projecting an operating margin of 12.6% compared with 12.4% last year.

The company’s fourth-quarter earnings were an improvement from the third quarter, when the company missed expectations and reported a decrease in revenue because of lost projects and a pullback in client spending.

Write to Alexandra Bruell at alexandra.bruell@wsj.com

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