International growth can drive profits for Interpublic Group
All about: Interpublic Group of Companies
Ticker: IPG. Exchange: NYSE.
What does the company do? Advertising and marketing services
2009 Financial report: Net sales $6 billion. Net income $93.6 million.
Q. I've been studying companies that I might invest in. Can the stock of the Interpublic Group of Companies Inc. continue to do well?—C.G., via the Internet
A. While the economy inevitably plays a role in this advertising and marketing company's profits, the need to project a positive image remains important worldwide.
This global company controls communication agencies in more than 100 countries. That includes some of the field's best, such as McCann Worldgroup, Draft FCB Group, Lowe Worldwide, Golin Harris, Magna Global and Deutsch.
Its Magna unit, for example, was recently quoted in the media regarding a survey that found reality series broadcasts declined from 21 percent of US primetime programming during 2007-2008 to 18.5 percent last year.
After overly aggressive acquisitions in the 1990s, with the serious accounting problems and weak revenue growth that followed, Interpublic Group restructured and appears to be completing its turnaround.
Shares of Interpublic Group (IPG) are up 16 percent over the past 12 months following last year's 86 percent gain. It posted a fivefold increase in second quarter profits to $105.3 million thanks to strong results from emerging international markets and a broad range of industry sectors.
Nonetheless, Interpublic must cope with pricing pressure on its fees, high expectations of major clients, ever-evolving technological changes throughout the communication industry and the fact that it has lagged behind its peers in profitability.
The consensus analyst opinion on the stock of Interpublic is "buy," according to Thomson Reuters, consisting of four "strong buys," nine "buys" and three "holds." The firm is in good financial health and benefits from offering a wide array of services.
International growth is expected to become a major driver of profits, since mature markets such as the US and Europe are fairly saturated. Most recently, Interpublic's media buying arm has been in talks to buy or form a partnership in China with online advertising firms for digital ad-buying units there. China's Internet population now ranks as the largest in the world.
Q. If my stock splits, how does that affect my stock certificate?—P.B., via the Internet
A. I'm assuming you keep your own stock certificates rather than leave the investment in a brokerage account. The company whose stock you own will have your address and know how many shares you have.
"Typically, the company will send you a new certificate for your extra shares that result from a stock split," explained Ray Ferrara, certified financial planner, president and CEO of ProVise Management Group LLC, Clearwater, Fla. "So hang onto those certificates."
Keep certificates in a safe place such as a safety deposit box, said Ferrara, who considers it better to leave the shares in electronic form in a brokerage account.
In a split, a two-for-one stock split means that your 100 shares at $30 a share become 200 shares worth $15 each.