Buyout Strategy & Strong Liquidity Aid IPG Despite Seasonality Impacts

Interpublic Group IPG is relying on acquisitions to expand its product portfolio. The dividend payment strategy and strong liquidity position are appealing to investors. However, client concentration can hurt the top line, whereas seasonality can affect cash position.

IPG  reported mixed first-quarter 2025 results. Interpublic Group’s adjusted earnings of 33 cents per share surpassed the Zacks Consensus Estimate by 10% but decreased 8.3% from the year-ago quarter. Revenues before billable expenses (net revenues) of $2 billion missed the consensus estimate by a slight margin and declined 20% year over year.

How is IPG Faring?

Interpublic Group has a strong acquisition strategy aimed at high-growth areas and regions. The company acquires and invests in global companies to expand its product portfolio and adapt to the evolving marketing services and media landscape. In recent years, IPG has acquired agencies across the marketing spectrum, including data, technology, e-commerce, healthcare communication firms, and agencies with full-service capabilities.

IPG’s dividends payment strategy makes it a must-have stock for income-seeking investors. In 2022, the company paid out $457.3 million in dividends. Interpublic Group then paid out $479.1 million and $496.5 million in 2023 and 2024, respectively. Such moves indicate the company’s commitment to creating value for shareholders and underline its confidence in its business.

Interpublic Group’s current ratio at the end of the first quarter of 2025 was pegged at 1.07, slightly higher than the industry average of 1. Furthermore, this metric has grown marginally from the year-ago quarter due to an increase in accounts receivable. The numbers indicate an improving liquidity position, and the fact that the current ratio exceeds 1 suggests that the company will easily pay off its short-term obligations.

Meanwhile, IPG’s top 10 clients accounted for almost 20% of net revenues in 2022, 2023 and 2024. This implies that Interpublic highly relies on its large clients for a significant portion of its top line. IPG must maintain a strong client relationship with older ones while attracting newer ones. A decline in advertisement spending by any of the big clients can be detrimental to the company’s revenues.

Interpublic Group’s cash position is affected by seasonality in business. The phenomenon is observed in the first nine months of a year, with the biggest impact in the first quarter. This is because of clients’ fluctuating annual media spending budgets and changing media spending patterns varying throughout the year with different localities.

Zacks Rank & Stocks to Consider

IPG has a Zacks Rank #3 (Hold) at present.

Some better-ranked stocks from the broader Zacks Business Services sector are Marqeta MQ and SPX Technologies SPXC, carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Marqeta has a long-term earnings growth expectation of 28%. MQ delivered a trailing four-quarter earnings surprise of 24.4%, on average.

SPX Technologies has a long-term earnings growth expectation of 18%. SPXC delivered a trailing four-quarter earnings surprise of 8.3%, on average.

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This article originally published on Zacks Investment Research (zacks.com).

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