Analyst Note| Ali Mogharabi |
Interpublic Group’s third-quarter results beat our estimates and the FactSet consensus estimates. Like its peer, Publicis, IPG is benefiting from more spending by advertisers as the economy is displaying signs of gradual improvement. However, given the recent surge in COVID-19 cases, the risk of an interruption in the economic recovery remains. We raised our fair value estimate to $26 from $24 as we are now assuming lower decline in revenue for the year. In addition, as demonstrated this quarter, the firm’s restructuring efforts are bearing fruit and we expect IPG to expand margins beyond the historical highs we saw in 2019. The firm’s dividend, which is yielding 5.4%, remains safe. While the stock price increased 4% in reaction to third-quarter results, we continue to view this narrow moat name attractive.