As the Industry Continues to Struggle, IPG Reports a Stronger Q2 and First Half

Mediabrands, McCann, FCB and MullenLowe, among others, outperformed

IPG posted better-than-expected 2018 second-quarter results, after its rival disappointed. - Credit by Getty Images
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On Tuesday morning, Interpublic Group reported a strong second quarter and first half of 2018 for the three- and six-month periods that ended on June 30, with total revenue beating analysts’ expectations.

The holding company posted second-quarter earnings of 43 cents a share and earnings for the first half of the year of 45 cents a share on an adjusted basis. Total second-quarter revenue increased 9.4 percent to $2.4 billion and first-half net revenue grew 7.3 percent to $4.6 billion.

The consensus among analysts on Wall Street had expected the second-quarter earnings of 43 cents a share IPG reported but only $1.9 billion in revenue, according to Zacks Equity Research.

Organic net revenue rose 5.6 percent in the second quarter, with U.S. organic net revenue up 4.6 percent. International organic net revenue climbed 7.2 percent for the three months that ended on June 30. For the first half of 2018, organic net revenue was up 4.7 percent overall, 4.5 percent in the U.S. and 5.1 percent internationally.

Broken down further, organic net revenue growth was up 4.6 percent in Latin America, 14.7 percent in the U.K., 11.7 percent in Continental Europe and 1.9 percent in Asia-Pacific.

IPG stock rose 1.14 percent in early morning trading.

Michael Roth, IPG chairman and CEO, said on an earnings call this morning that he is “extremely pleased” with the second quarter.

“The quarter reflects revenue increases across all disciplines, led by exceptional growth in media and at our creatively-led integrated agencies, our digital services, public relations, events and sports marketing,” Roth said.

He noted that “the list of contributing agencies is long” and includes Mediabrands, McCann Worldgroup, FCB, MullenLowe, Huge, Weber Shandwick, Golin, Octagon and Jack Morton.

IPG was fueled by increases in the healthcare, financial services, government, consumer goods and auto and transportation industries, Roth added. “We saw increases from both net new business wins and existing client spend.”

Brian Wieser, senior research analyst at Pivotal Research Group, said in a note this morning that IPG’s “positive results should be framed in context of an industry working through a range of negative trends,” including “enhanced contract scrutiny” and in-housing of agency work “in various forms.”

“More generally, we do see opportunities for the industry to return to organic growth, albeit at levels that are lower than those observed in the 2010 to mid-2016 era,” Wieser noted. “A return to that growth will help the industry, but at the same time, we don’t think IPG outperforms the industry in the long-run.”

IPG’s better-than-expected report came on the heels of rival holding companies Omnicom and Publicis Groupe both reporting revenue that missed expectations last week.

IPG’s latest win was an expansion of its relationship with Nestlé following a review that concluded earlier this month. Perhaps more significant was tech behemoth Amazon’s decision to consolidate its entire $1 billion global media account with the IPG Mediabrands network late last year.

“This is an exciting time for our company,” Roth said on the earnings call. “We continue to drive growth that leads our industry from a foundation of outstanding consumer insights grounded in data and analytics, standout creative and precisely targeted communications.”

IPG also announced its $2.3 billion acquisition of Acxiom, an Arkansas database marketing company that collects and distributes information from about 2.2 billion consumers worldwide, earlier this month. The bulk of the acquired company will stand within IPG’s media network, Mediabrands, and its Acxiom Marketing Solutions division is expected to account for 8 percent of the new combined entity’s total revenues.

Roth said he is “confident” in IPG’s outlook for the full year, which was raised to a net revenue organic growth of between 4 percent and 4.5 percent.

@kitten_mouse Lindsay Rittenhouse is a staff writer at Adweek, where she specializes in covering the world of agencies and their clients.