Two down, one to go.
Moody’s Investors Service today upgraded Interpublic Group’s stock into investment grade status—eight months after Fitch Ratings did the same. In each case, Interpublic escaped junk bond territory.
Standard & Poor’s Financial Services, however, has yet to follow suit. That said, today marks the first time since 2003 that two of the three credit ratings agencies have deemed IPG investment-worthy.
Pre-2002, IPG enjoyed relatively high ratings among the agencies. Then the holding company unearthed a $183.1 million accounting imbalance that stemmed from years of overbooking revenue. The discovery forced IPG to re-state its revenue back to 1997 and triggered a Securities & Exchange Commission investigation that IPG settled in 2008 by paying a $12 million fine.
Along the way, IPG worked to tighten its financial reporting across agencies and geographical regions. (The revenue overbooking occurred primarily among offices of McCann Erickson in Europe.) IPG’s operating margin and organic revenue growth also have improved, though not without some bumps in the road.
“In our opinion, the significant challenges to getting the company on the right track are now behind it and hence we do not expect downward rating pressure,” read a statement from Moody's. “However, if IPG fails to increase top line growth relative to its peers, suggesting a fundamental loss of material clients and market share which we will believe will lead to secular revenue erosion, or if margins erode, downward pressure on the rating will occur.”
In above-average volume trading today, IPG’s stock closed at $11.18, down 1 percent from yesterday’s close of $11.34, according to Yahoo Finance.
