While near-term datapoints are not good and IPG is no quick fix, the precursor to bridging the margin gap (i.e., +tive organic revs) is closer now. At worst we are early, but risk/reward has now improved sufficiently for patient investors seeking an exceptional revenue recovery/margin upside opportunity.Chesler gives a nod to IPG's past accounting troubles:
We have never doubted that IPG has done much to turn the business around and that it was well on its way to being a "normal" agency. Our concern, rather, was the economy and ad market, which undermined growth necessary for leveraging investments in the business.Chesler admits that there are risks ahead, especially a weak recovery. That goes doubly true for advertising, where many are saying spend may never get back to the old levels as clients become used to working on the internet (cheap) and with promos (measurable ROI).
IPG has certainly suffered in the hard times. Its Q2 2009 revenues declined 20 percent to $1.5 billion; net income sank 70 percent to $21 million.
Chesler may indeed be early as a bull on IPG. If you look at the revenue yield on every $1 IPG invests in salaries and total operating expenses, there's no clear trend that the network is becoming a more productive business. This chart tells the story:
Image: CEO Michael Roth
- More Details on Planned Layoffs at Interpublic Agencies
- Interpublic Q2: $347M in Cash Gone; More Layoffs Promised; Execs Get $61K in Bonuses
- Publicis, Interpublic Owed $167 Million in GM Bankruptcy
- IPG's GM Bankruptcy Credit Line Explained
- IPG Q1: Revenues Down 10.8%; Wall Street Wants "Worst-Case" GM Scenario; Layoffs Still a Threat
- Omnicom, Publicis Worst Hit in Auto Brand Axings
- Interpublic Q4: Revenue Declines; Good News in the Details; Layoffs Still a Threat
- IPG Maximizes Pain of Layoffs Through Uncertainty
- IPG and Omnicom Downgraded by Deutsche Bank on Layoff News
- IPG to Cut Up to 2,000 Jobs; PHD Atlanta to Close