February 14, 2018 / 1:03 PM / 2 years ago

Interpublic sees stronger 2018 after lacklustre year, shares rise

(Reuters) - U.S. advertising group Interpublic reported higher-than-expected earnings for the final three months of 2017 and forecast a stronger year ahead, signalling that client spending may be ticking up after a year-long slowdown.

For much of 2017, Interpublic — one of the world’s four big traditional advertising groups — faced sluggish spending from large customers including retailers which were pressured by competition from e-commerce platforms.

The New York-based company, like its British peer WPP, is also adapting to an industry transformed by online advertising heavyweights Google and Facebook.

On Wednesday, Interpublic Chief Executive Michael Roth said he expected a strengthening global economy to support growth in the industry.

“While the caution we saw much of last year will not lift overnight, we expect to gradually put the slower revenue growth of 2017 behind us,” he said on a call with analysts.

Roth also said his company was working on more joint projects with Facebook and Google.

“The relationship ... with Google and Facebook is probably better now than it has been historically,” Roth said.

Interpublic said it would continue to invest both in its traditional ad agencies that include FCB, McCann and MullenLowe, as well as digital marketing services.

Its shares rose 10.7 percent to $24.60 on Wednesday morning.

The company expects organic revenue — which excludes the impact of foreign exchange and mergers — to rise 2 to 3 percent in 2018. That is above last year’s 1.8 percent growth, but lags the 5 to 6 percent increases in organic revenues Interpublic saw in 2016 and 2015.

For the fourth quarter ended Dec. 31, Interpublic grew organic revenue by 3.3 percent, easily ahead of Wall Street expectations of 0.9 percent, according to FactSet.

“Post these results, we see opportunities for the industry to return to organic growth, albeit at levels that are lower than those observed in the 2010-mid-2016 era,” said Pivotal Research analyst Brian Wieser.

Interpublic’s total revenue rose 3.4 percent year-over-year to $2.34 billion, beating analysts’ average expectation of $2.30 billion, according to Thomson Reuters I/B/E/S. Overseas revenue rose 4.9 percent, while U.S. revenue climbed 2.2 percent.

Net income available to IPG stockholders fell to $316.6 million from $317.6 million. Results included a one-time benefit of $36 million thanks to new U.S. tax laws.

Excluding one-time items, Interpublic earned 79 cents per share, beating analysts’ estimates of 77 cents.

Reporting by Sonam Rai in Bengaluru; Editing by Sai Sachin Ravikumar

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