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The Interpublic Group of Companies Inc IPG

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Interpublic Reports Better-than-Expected Q2 Results; Maintaining $24 FVE for Undervalued Shares

Ali Mogharabi Senior Equity Analyst

Analyst Note

| Ali Mogharabi |

Interpublic reported second-quarter revenue and non-GAAP net income above our projections and FactSet consensus estimates, as the impact of COVID-19 on its clients’ ad spending was not as severe as we initially expected. The firm’s intangible asset moat source--its agencies’ brands--has successfully maintained clients and driven some account wins. However, while the firm saw improvement in ad spending in June, management remains uncertain about whether the second-quarter revenue decline was the bottom. Similar to its peers, IPG implemented some restructuring in response to the pandemic, which may make its operations a bit leaner next year. We increased our projections slightly but are maintaining our $24 fair value estimate. Narrow-moat IPG remains attractive as it continues to trade at only 0.77 times our fair value estimate. In addition, its dividend, which is currently yielding 5.5%, appears to be safe.

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Company Profile

Business Description

Interpublic Group is the world's fourth- largest ad holding company, based on annual revenue. It provides traditional advertising services along with digital and other services such as public relations through various acquisitions. IPG has made these services available in over 100 countries. The company generates more than 75% of its revenue from developed regions such as the United States and Europe.

909 Third Avenue
New York, NY, 10022
T +1 212 704-1200
Sector Communication Services
Industry Advertising Agencies
Most Recent Earnings Jun 30, 2020
Fiscal Year End Dec 31, 2020
Stock Type High Yield
Employees 54,300