IPG managed to deliver another unpleasant surprise last week to Wall Street. Industry analysts were expecting a per-share profit when IPG reported earnings on Wednesday. Instead, the underperforming holding company reported a net loss of $578 million.
Analyst Troy Mastin of William Blair & Co. said the $584 million in charges that IPG reported is just shy of a company record for any quarter in its history. IPG has recorded nearly $3 billion in charges during the past five years, an IPG rep confirmed, more than half of its market capitalization, which at the close of Friday's trading stood at $5.3 billion.
During a call with analysts, CEO David Bell said, "Turnarounds can be messy and are often unpredictable in the short term. And that's true of this company."
The bulk of the write-down (about $445 million) stemmed from two divisions: The Partnership, which includes Lowe, and Constituency Management Group, which includes Golin/Harris, IPG said.
Yet, not all the news was bad. Organic revenue grew 1.8 percent for the quarter—the sixth consecutive quarter of sequential improvement—and worldwide revenue rose 6 percent. So, analysts maintained previous stock ratings and again gave IPG the benefit of the doubt. Said J.P. Morgan's Fred Searby: "While there are no signs of an imminent turnaround, we believe IPG is putting the pieces in place for an eventual turnaround."
Still, IPG's performance continues to lag behind its peers, and Wall Street is impatient. "Enormous value has been lost through the years, and the the statute of limitations on blaming former management is close to expiring," wrote Merrill Lynch's Lauren Rich Fine.