Advertising services provider The Interpublic Group of Companies, Inc. (IPG) is set to report its fourth-quarter 2014 earnings results before the opening bell on Feb 13. In the last reported quarter, Interpublic’s earnings matched exactly with the Zacks Consensus Estimate. Let's see how things are shaping up for this announcement.
Key Factors in the Fourth Quarter
Interpublic forms an integral part of the communications industry, which is highly competitive in nature. Agencies and media services compete with other agencies and creative or media services providers to maintain existing client relationships and to win new clients. Any loss of an existing media services contract leads to significant loss of revenues for the company.
During the quarter, General Motors Company’s (GM) Cadillac brand selected Publicis Groupe SA (PUBGY) as its new global advertising agency of record, replacing agencies under Interpublic. The contract entails Publicis Worldwide to manage Cadillac’s global creative and strategic responsibilities. For the record, Interpublic’s Lowe and Partners agency had been Cadillac’s creative agency of record since Jul 2013.
To make matters worse, Interpublic is susceptible to adverse foreign currency translation impact as it derives a major portion of its revenues from outside the U.S. Strong dollar appreciation and prevailing uncertainty over future monetary policy are likely to have an adverse effect on the prospects of the company. The company also faces other risks like local legislation, monetary devaluation, exchange control restrictions and unstable political conditions, which may lead to a decline in the revenue and impact the financial position of the company as well.
Earnings Whispers
Despite some bearish trends, our proven model does not conclusively show that Interpublic is likely to miss earnings this quarter.
Zacks ESP: Expected Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently pegged at 0.00%. This indicates a likely earnings beat.
Zacks Rank: Interpublic’s Zacks Rank #4 (Sell) combined with 0.00% ESP reduces the predictive power of an earnings miss for the company. Note that stocks with a Zacks Ranks of #1 (Strong Buy), #2 (Buy) and #3 (Hold) coupled with a positive ESP have a significantly higher chance of beating earnings. The Sell rated stocks (#4 and #5) should never be considered going into an earnings announcement.
Other Stocks to Consider
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Bunge Limited (BG), earnings ESP of +2.82% and a Zacks Rank #3.
Boyd Gaming Corporation (BYD), earnings ESP of +16.67% and a Zacks Rank #2.
Procera Networks, Inc. (PKT), earnings ESP of +25.00% and a Zacks Rank #2.
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