IPG Stock Surges On Strong Q4 Results

Interpublic stock climbed more than 5% in Wednesday morning trading after the ad holding company posted strong earnings for the fourth quarter and full year 2018 including a 7% jump in Q4 organic revenue growth.

WPP drifted higher while Omnicom and Publicis Groupe dipped slightly during morning trading on U.S. exchanges.

IPG’s Q4 growth was exceptional for the major ad holding company sector where average growth has been in the low-to-mid single digit range in recent years.

IPG incorporated Acxiom results for the first time, which contributed $182 million (+5%) in revenues during Q4. IPG completed the acquisition on Oct. 1 of last year. The firm stressed however that its organic growth tabulation did not include Acxiom, and won’t until the fourth quarter of 2019 when the data management subsidiary will have been owned for a full year.



And with two big account losses in Q4—U.S. Army and Fiat Chrysler—IPG indicated that layoffs would be coming and that it is planning a $30 million to $40 million charge against earnings for the first quarter of 2019 to “right size” its cost structure to offset the impact of those losses. The company will also be exiting some real estate contracts related to the losses.

Despite those headwinds, IPG forecasts 2019 organic growth of between 2% to 3%. It noted that the full integration of Acxiom will take the balance of 2019 to complete.

“Our opportunity for solid growth in 2019 is promising,” IPG CEO Michael Roth told analysts and investors on a Wednesday morning earnings call.  Referring to the Q4 account losses, Roth said, “these are not the norm for us. We will have largely cycled through their impact by this time next year, and we are well-positioned … to compete for meaningful new business opportunities that are coming up over the course of this year. “

Roth outlined four “fundamental” changes in the industry that the company has worked to address:  “First, a need to adapt to rapidly changing consumer media habits; second, the potential for disintermediation as clients work directly with digital platforms; third, the in-housing of certain marketing practices; and finally, the threat, though still in the early stages, of new entrants into our competitive space.”

But with the Acxiom deal and other moves, Roth added, “We remain optimistic about our ability to thrive in this environment.”

High on the list of priorities, said Roth was addressing client needs for business transformation and the company has hired a number of consultants to focus on transformation projects. Successfully completing those projects should lead to expanded business relationships, Roth said.

Review activity is lower now than it was a year ago, although Roth says he expecting it to pick up as the year goes on. For now, the company has no accounts in review.

The company’s UK business was up sharply in the fourth quarter and Roth said that the firm has not felt any effect as yet from the ongoing Brexit process.

Roth usually gives shout-outs to well performing agencies or operating units and for 2018 he said, “these were led by Mediabrands, which once again posted outstanding results globally. Growth was especially notable at our digital offerings, Cadreon and Reprise, further demonstrating the key role these high value offerings play in our media engagements.” UM also had a strong year and “Initiative continued to be a great turnaround story for IPG.”


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