​Ad Wars: WPP’s Woes Could Help Interpublic Group

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The Interpublic Group of Companies (IPG) is a large conglomerate of advertising, marketing, communications and public relations companies serving all global markets; its clients include Alphabet (AAPL), Microsoft (MSFT) and Coca-Cola (KO), notes Crista Huff, editor of Cabot Undervalued Stocks Report.

Interpublic is in a position to benefit from a shift in professional equity portfolios as portfolio managers ponder the resignation of the CEO at WPP (WPP).

WPP is a competitor with less attractive EPS growth than Interpublic and a bearish price chart. Money flowing from WPP to IPG could certainly enhance IPG’s total return potential in 2018.



Interpublic reported $0.03 first quarter EPS on April 27, when the market was expecting $0.05. Quarterly revenue of $2.17 billion far surpassed the consensus estimate of $1.82 billion, and included upside surprises to both U.S. and international revenue expectations. Interpublic’s profits are seasonally slow in the first quarter and highest in the fourth quarter.

For comparison, the fourth quarter 2018 consensus EPS estimate is $0.91. Interpublic’s peers Omnicom Group (OMC) and Publicis Groupe S.A. (PUBGY) also delivered bigger-than-expected first quarter revenue, but Interpublic’s revenue growth surpassed them both.

The company foresees 2% to 3% organic growth of net revenue in 2018 and increasing operating margins. Wall Street expects full-year 2018 EPS to grow 22.0%, and the P/E is 13.7. Interpublic repurchased $55 million of its stock during the first quarter.

IPG is an undervalued growth & income stock with an attractive rising annual dividend. The stock yields 3.5%. Interpublic is trading near its former high of $25 from July 2017. I expect additional capital gains in 2018, and will likely sell later this year if 2019 earnings projections don’t increase. Strong Buy.

Crista Huff is editor of the Cabot Undervalued Stocks Report.

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Companies

Symbol Name Price Change % Volume
AAPL Apple Inc. 188.58 0.43 0.23 17,460,963 Trade
OMC Omnicom Group Inc. 71.96 -0.12 -0.17 1,732,075 Trade
IPG Interpublic Group of Companies Inc. (The) 23.02 -0.12 -0.52 1,982,933 Trade
KO Coca-Cola Company (The) 42.40 0.08 0.19 8,806,470 Trade
MSFT Microsoft Corporation 98.36 0.05 0.05 18,363,918 Trade
PUBGY Publicis Groupe S.A. ADR (Sponsored) 17.80 0.21 1.19 11,944

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