July 18, 2014 / 11:46 AM / 4 years ago

UPDATE 2-Interpublic revenue gets a boost from UK, beats estimate

* Second-quarter revenue rises 5.4 pct

* UK revenue up 33.2 pct

* Shares up 1.5 pct in early trading (Adds analyst comments, details; updates share move)

By Abhirup Roy

July 18 (Reuters) - Advertising company Interpublic Group of Cos Inc reported better-than-expected quarterly revenue, boosted by strong growth in the UK and higher ad spending in its core U.S. market.

The company, whose agencies include McCann Erickson and Draftfcb, said it was well positioned to exceed organic growth target of 3-4 percent for the current year.

Interpublic’s clients include General Motors, Unilever and Johnson & Johnson.

International revenue rose 8 percent in the second quarter ended June 30, from a year earlier, driven by a 33.2 percent jump in the UK.

“I think it reflects what was a very very strong market for marketing services in the UK at the present time,” Pivotal Research Group analyst Brian Wieser said.

British companies increased their marketing budgets for the seventh successive quarter from April to June as they sought to cash in on optimism over the country’s recovery from recession.

Interpublic’s revenue in the United States rose 3.4 percent, helped mainly by a contract from Microsoft Corp.

Shares in Interpublic were up 1.5 percent at $19.31 in early trading.

“IPG has stood out YTD as the best performing ad stock, and for good reason,” Macquarie Research analysts said in a pre-earnings note on Thursday.

“IPG has the most upside earnings potential in the group with a load of account wins helping boost revenues, a lower cost base, and a much cleaner and lower-cost balance sheet.”

Shares of Interpublic, whose rivals include Omnicom Group , WPP and Publicis Groupe, have gained 7.5 percent so far this year. The Thomson Reuters Global Advertising and Marketing Index has dropped 4.14 percent in the same period.

The company’s operating margin improved 60 basis points to 10.6 percent in the second quarter.

Interpublic said it expected to improve full-year operating margin to at least 10.3 percent. It reported an operating margin of 9.3 percent in 2013.

“Getting to this 10.3 percent margin or better is paramount for the company in term of credibility of hitting its financial targets so it’s something that Wall Street will certainly focus on if they are looking at Interpublic,” Pivotal Research’s Wieser said.

Global ad spending rose nearly 6 percent to $545.4 billion in 2014 and is expected to reach $662.7 billion by 2018, according to statistics website Statista.

Interpublic’s revenue rose 5.4 percent to $1.85 billion in the second quarter, above the average analyst estimate of $1.84 billion.

Net income available to common stockholders rose to $99.4 million, or 23 cents per share, from $79.9 million, or 18 cents per share.

Excluding items, the company earned 25 cents per share, in line with analysts’ average estimate, according to Thomson Reuters I/B/E/S. (Reporting by Abhirup Roy in Bangalore; Editing by Maju Samuel)

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