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Solid Liquidity Boosts Interpublic (IPG) Despite Seasonality

Zacks Equity Research
·2 min read

The Interpublic Group of Companies, Inc. IPG currently benefits from strong liquidity and shareholder-friendly measures. Meanwhile, seasonality is a headwind.

IPG’s adjusted earnings (excluding 5 cents from non-recurring items) of 63 cents per share beat the Zacks Consensus Estimate by 8.6%. However, the bottom line dropped 10% on a year-over-year basis. Net revenues of $2.38 billion beat the consensus estimate by 3.1% but declined 5.3% on a year-over-year basis. Total revenues of $2.74 billion increased 9% year over year.

How is Interpublic Faring?

Interpublic’s current ratio at the end of second-quarter 2022 was pegged at 1.04, higher than the current ratio (a measure of liquidity) of 1 reported at the end of the prior-year quarter. Increasing current ratio indicates that IPG has no problem meeting its short-term obligations.

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Commitment to shareholder returns makes the Interpublic stock a reliable investment to compound wealth over the long term. In 2021 and 2020, IPG paid out $427.7 million and $398.1 million of dividends, respectively. In 2019 and 2018, IPG paid out $363.1 million and $322.1 million of dividends each. Such moves indicate its commitment to creating shareholder value and underlining its confidence in its business.

However, Interpublic’s cash position is affected by seasonality in business. This is due to clients’ fluctuating annual media-spending budgets and changing media-spending patterns, which vary throughout the year in different localities. Seasonality is observed in the first nine months of a year, with the biggest impact felt in the first quarter.

Zacks Rank & Key Picks

Interpublic currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Some better-ranked stocks in the broader Zacks Business Services sector are Avis Budget Group, Inc. CAR, Genpact Limited G and CRA International, Inc. CRAI.

Avis Budget sports a Zacks Rank #1 at present. CAR has an earnings growth rate of 108.4% for 2022.

Avis Budget delivered a trailing four-quarter earnings surprise of 69.5%, on average.

Genpact carries a Zacks Rank #2 (Buy) at present. G has a long-term earnings growth expectation of 12.3%.

Genpact delivered a trailing four-quarter earnings surprise of 10.1%, on average.

CRA International flaunts a Zacks Rank of 1, currently. CRAI has a long-term earnings growth expectation of 14.3%.

CRAI delivered a trailing four-quarter earnings surprise of 26%, on average.


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Zacks Investment Research