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U.S. Equity Research News
Salmon Upgrades Interpublic Group (IPG) to OUTPERFORM from MARKET PERFORM
October 30, 2009
Research analyst Dan Salmon has today upgraded Interpublic Group (IPG) to an OUTPERFORM rating from MARKET PERFORM.
From Salmon's note: "The risk/reward profile looks favorable after shares have pulled back 26% this month (versus -1% for S&P 500). We have five primary reasons for the rating change: 1) relative valuation versus the peer group is attractive as shares trade at a 51% discount based on 2010 EBITDA; 2) the FX headwind has turned into a tailwind; 3) review activity is high presenting the opportunity to fill account holes and address the weak 2009 record; 4) we have increased confidence in the Lowe/Deutsch merger after the Volkswagen win, and; 5) with an improved balance sheet, a credit upgrade is possible in 2010. The stock offers the most potential upside amongst the holding companies if it can close its margin gap and valuation discount versus peers. Expectations have been lowered after management indicated that its 2009 targets (-10% organic growth, 7-7.5% operating margins ex severance) would not be met. 3Q results were largely as expected, with the 14.2% organic revenue decline expected to be the weakest of the group."
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