IPG Beats Expectations in Q3, Raises Full-Year Organic Growth Target

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IPG chairman and chief executive officer Michael Roth.
IPG chairman and chief executive officer Michael Roth. Credit: IPG
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Interpublic Group of Cos.' revenue increased 3.0% to $1.92 billion in the third quarter of 2016 compared to the same period last year, the holding company said Friday. It also increased full-year 2016 organic growth targets.

"We had previously increased our full-year 2016 organic growth target to the high end of the 3 to 4% range that we shared with you coming into the year," said IPG CEO Michael Roth said on a conference call to discuss the results. "In light of the strength of our offerings and our strong organic revenue performance through nine months, we believe it's appropriate to raise our organic growth target to a range of 4 to 5%."

Net income was $128.6 million during the third quarter, compared to $74.9 million for the period last year. Operating income was $207.2 million, compared to $191.9 million in 2015. Operating margin was 10.8% for the quarter, compared to 10.3% a year ago. Organic revenue for the third quarter increased 4.3% from the quarter a year prior.

The marketing services giant, which has a portfolio including agency groups McCann Worldgroup, FCB, IPG Mediabrands and Weber Shandwick, slightly beat expectations of $1.9 billion in revenue, according to Yahoo Finance.

For the first nine months of 2016, IPG's revenue increased 3.0% to $5.58 billion, with an organic revenue increase of 4.8% over the first nine months of 2015.

This was comprised of an organic increase of 1.8% in the U.S. and 8.1% internationally.

U.S. organic revenue growth for the third quarter was 1.8%, "against extremely strong comparables in the quarter for two consecutive years," said Mr. Roth. International organic growth for the quarter was 8.1%, driven by continental Europe, the U.K. and Latin America.

IPG Chief Financial Officer Frank Mergenthaler said on the conference call that the company's integrated agency networks saw an organic increase of 3% for the quarter and 4.7% for the first nine months of the 2016, "led by strong growth at McCann, R/GA and Huge."

The holding company's Constituency Management Group of marketing services specialists and PR agencies saw organic growth of 5.6% for the third quarter and 5.3% for the first nine months. "We again had strong performance at Weber Shandwick, as well as our events business Jack Morton and in sports marketing at Octagon," said Mr. Mergenthaler.

On the media side, Mr. Roth said on the call that IPG has "a long-standing record of transparency in our dealings with marketers and media vendors," alluding to the Association of National Advertisers' conclusion that many media agencies aren't fully open with marketer clients about pricing or decisionmaking. The company is "proud of the role we play as wholly objective and media-agnostic advisors to clients," he added.

Mr. Roth also said during the call that IPG's "commitment to diversity and inclusion" has long been a talent priority for the company and a "driver of business performance."

"An environment that encourages respect and trust is key to a creative business like ours, and a competitive advantage comes with having a variety of perspectives and beliefs when solving our clients' business challenges," he said on the call.

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