IPG Lowers Earnings Estimates

NEW YORK–Interpublic Group on Wednesday lowered its forecast for earnings per share both for the third quarter and the year.

For 2002, IPG now projects earnings per share in the $0.85-$0.90 range, down significantly from a previous forecast of $1.25-$1.35. And for the third quarter, the company expects earnings of $0.08 to $0.10 per share, down from a Wall Street consensus of $0.28 cents per share.

Separately, IPG said that, based on a thorough review, it is revising its estimate of an accounting imbalance that previously surfaced at McCann-Erickson units in Europe. In August, IPG estimated the impact at $68.5 million over five years; now, it is “not expected to exceed $120 million” on a pre-tax basis.

The company attributed the lower earnings’ forecasts to “recent significant deterioration” in the motor sports division of Octagon, its global sports marketing arm. IPG also cited “precipitous drops at a number of project-based businesses and general market pressure” due, in part, to the “faltering economies” in Latin America and Japan.

“We are dealing with our short-term issues in marketing services aggressively and directly,” said IPG CEO John Dooner, in a statement. “Among our other operating companies, many of our brands are demonstrating competitive vitality, as evidenced by encouraging new business gains.”

Operational issues at Octagon were first cited in August, during IPG’s second-quarter analysts’ call. At the time, IPG estimated that the business would reduce 2002 earnings by $0.04. “More recent analysis indicates the negative impact will be $0.15-0.20 per share,” said IPG CFO Sean Orr, adding, “We are currently reassessing the composition and structure of our motor sports holdings.”

The new forecasts come roughly a month before IPG is to report its numbers for the third quarter.

–Andrew McMains