Interpublic Group CEO Michael Roth gave shout-outs to a lot of agencies on a conference call today to discuss the company’s strong third-quarter results. And Wall Street tipped its hat to IPG, boosting its share price more than 9% in midmorning trading to $24.58.
But when he was asked on the call what was really different, he said the “tone” of business is “very solid” in the U.S. which accounts for more than 60% of the firm’s revenue. And business has also improved globally including in pockets of Europe, Asia and much of Latin America -- including Brazil, where economic conditions have been tough for some time.
And that improved business tone has had a positive impact on IPG’s top-20 client roster, “where we’ve seen a return to good growth.”
Roth cited healthcare as an over-performing sector where IPG is over-weighted with 25% of its business coming from that space alone. It’s a “key driver,” he said. By contrast, Publicis Groupe said it was selling a big chunk of its health care operation earlier in the week, dubbing it a “non-core activity.”
But executives at IPG competitors have also talked recently about improving business conditions in the market generally.
For the couple of years prior to 2018, the holding companies generally were posting low single-digit organic growth numbers and citing stagnant general market conditions, including low client growth rates as the main reason.
Now it seems those general market conditions are on the upswing. Asked on the earnings call if he thought 5% growth was “the new run rate for growth” going forward, Roth replied: “I think it’s reasonable.” But he also reminded those listening in that IPG specifically believes it will achieve growth of 4% to 4.5% for full-year 2018, in line with previous guidance.
What hasn’t changed is the company’s commitment to what it calls its “open architecture,” by which the firm can pull together resources throughout the company to best serve client needs. Other holding companies have variations of that approach, which clients are increasingly calling for as part of integrated offerings that include creative, media and related services.
Much of the discussion on the Friday call focused on IPG’s recent $2.3 billion Acxiom purchase, which Roth said would make a strong IPG offering even stronger as marketers focus on first-party data to drive targeted marketing and advertising at scale.
IPG says the acquisition will be accretive from the start estimating growth for the unit of 5% in year one. In some ways the heavy lifting now begins that the transaction has been completed. IPG will now integrate the operation, starting with its media agencies, which Roth described as the “biggest opportunity.” Once that task is complete the data firm will be integrated with the holding company’s creative agencies as well as with other shops in the firm’s portfolio.
Asked if Acxiom filled the last major gap in the holding company’s offering, Roth replied that “We think our core businesses are where they should be,” and that he doesn’t see another out-sized deal like Acxiom anytime soon. “We’ll continue to invest in our brands,” he said, to insure that they remain “very well positioned.”