They’re all at it, in the wake of Publicis Groupe, Omnicom, Havas and WPP, Interpublic, owner of McCann’s and Daft FCB has posted some astonishingly good quarterly results.
Here’s what Tim Bradshaw in the Financial Times makes of them:
‘The upswing in American advertising spending has carried Interpublic back into investment-grade status, after its third-quarter results beat expectations.
Fitch, the ratings agency, upgraded Interpublic’s issuer default rating to BBB from BB+ on Friday, citing improved growth and careful balance-sheet management.
The upgrade came as IPG, which owns agencies including McCann Worldgroup and Draftfcb, reported third-quarter revenues up 9.4 per cent to $1.56bn. Net income leapt 88 per cent to $45.3m, while earnings more than doubled to 9c per share.
Michael Roth, chief executive of IPG, said the company would make good on its pledge to improve operating margins to greater than 8 per cent and return revenue growth to more competitive levels this year.
“Clients’ liquidity is improving,” said Mr Roth. “We see solid but moderating growth for the balance of the year … The tone of the business as we look to 2011 remains solid.”
Fitch said its upgrade reflected IPG’s “conservative financial management and its actions to both turn the company around between 2005 and 2008 and to weather the economic recession in 2009”.
“Management has demonstrated its willingness and ability to achieve an investment-grade credit profile,” Fitch said.
Analysts at Morgan Stanley said IPG’s revenue growth rate, which was unaided by any acquisitions, was “at the upper end of industry” comparators and comfortably beat consensus forecasts of about 7 per cent.
The US, IPG’s largest market, grew at 9.9 per cent, in the third quarter, but international growth of 8.7 per cent – fuelled by emerging markets such as India and Brazil – was greater than analysts had expected.
IPG’s shares rose 2.9 per cent to $10.72 by mid-morning trading in New York.
Interpublic is just the latest agency group to beat market expectations, after rivals Publicis, Omnicom and WPP all turned in strong third-quarter results.
But Sir Martin Sorrell, WPP’s chief executive, said the unexpectedly strong growth in the US media market would not last into 2011, calling the recovery a “dead cat bounce”, driven by the fiscal and monetary stimulus.
“America has been behaving like an emerging market,” he said. “I can’t see America continuing to grow at 8 per cent for us against 4 per cent for the company [WPP] as a whole and [gross national product] at 2 per cent.”
WPP had expected markets such as India, China and Brazil to drive a greater portion of its growth as the advertising market came out of recession.
“The sobering thing about the results so far this year is the importance of America,” Sir Martin said. “The lesson is: never write it off.”
WPP on Friday turned in its highest quarterly revenue growth in a decade, posting 7.5 per cent like-for-like growth in the third quarter.’
In other words Interpublic has levered itself out of the knacker’s yard and, on the basis of these numbers anyway, is once again in a position to compete with the likes of WPP, Omnicom and Publicis.
Financial analysts (and WPP’s Sir Martin Sorrell) are a bit dubious about this marcoms companies boomlet, surprised by the big bounce back in the US and also Western Europe.
They can see a slower than expected American recovery but they’re probably a bit too impressed by the so-called US ‘jobless’ recovery. But they’ve probably failed to clock that lots of hugely successful US companies manufacture abroad (like Apple and Hewlett-Packard) as do many of the car companies. General Motors (a massive Interpublic client) is bouncing back with a vengeance but a lot of that’s in China and the cars are mostly made in a joint venture with a Chinese company.
Eventually this recovery will begin to impact on US jobs and troubled areas like house sales and the doomsayers will be confounded.