(Reuters) - U.S. advertising group Interpublic IPG.N topped Wall Street estimates for quarterly results and raised its annual forecast for a key revenue measure, outperforming rivals Omnicom OMC.N and Publicis PUBP.PA.
Shares of Interpublic rose 7 percent in premarket trading on Tuesday, after second-quarter results showed that the New York firm is benefiting from higher client spending and grabbing market share from rivals.
Organic revenue at Interpublic, home to Madison Avenue’s iconic McCann agency, climbed 5.6 percent in the second quarter of 2018, growing at twice the pace analysts on average had expected, according to Thomson Reuters I/B/E/S.
“We had highlighted IPG as one of our few companies under coverage that had the potential to beat estimates, but we are surprised at the extent,” analysts at Jefferies said. “Organic growth ... will be about 500 basis points ahead of peers, a level we haven’t seen historically.”
U.S.-based Omnicom reported disappointing earnings for the second quarter, while Publicis saw a surprise drop in organic revenue. Results from Britain's WPP WPP.L, another "Big Four" traditional ad firm, are expected in September.
Interpublic, which counts Microsoft, Google GOOGL.O and Coca-Cola among its biggest clients, also increased its annual target for organic net revenue growth to a range of 4 percent to 4.5 percent.
“Our organic revenue growth is an encouraging signal that certain marketers have, in fact, return to growth mode in their engagements with us,” Interpublic Chief Executive Officer Michael Roth said on a conference call with analysts.
The results come as Interpublic and other ad firms seek new ways to compete better with Google and Facebook FB.O, which have transformed the industry in recent years by reaching much larger audiences through online advertising.
In response, traditional ad firms have boosted their online businesses and rolled out data-driven marketing platforms. Earlier this month, Interpublic agreed to buy data-mining firm Acxiom Corp's ACXM.O marketing business for $2.3 billion to help clients better target consumers.
Net income attributable to Interpublic common stockholders rose 35 percent year-over-year to $145.8 million or 37 cents per share in the three months ended June 30.
On an adjusted basis, the company earned 43 cents per share, topping analysts’ estimates of 42 cents. Revenue climbed 9.4 percent to $2.39 billion.
Interpublic’s shares have gained 9 percent this year and were trading at $23.50 before the bell on Tuesday.
Reporting by Shariq Khan and Vibhuti Sharma in Bengaluru; Editing by Sai Sachin Ravikumar
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