Deutsche Bank Comments On Interpublic Group Following Upbeat Investor Day

According to Deutsche Bank, Interpublic Group's IPG investor day was well-attended and upbeat, since management had much to feel good about having accomplished over the past five years and since it offered 2014 goals that suggested the transition remains on track. Deutsche Bank continues to favor IPG as the most leveraged way to play the sustained recovery of global A&P budgets. The key incremental was the detailed goals for 2014. Assuming 4-5% organic growth over the next three years, which Deutsche Bank thinks is reasonable given a continued global recovery, IPG believes that it can expand margins from 9.5-10% in 2011E to ~13% and generate $1.2bn of cash flow from ops in 2014. This is in-line with Deutsche Bank's 2014 margin forecast of 13.1% and better than its cash flow forecast of $1.0bn, which provides increased confidence the multi-year IPG turnaround has more legs. The McCann Worldgroup is the significant part of the business still a work in progress, yet the successful turnarounds in media and at Lowe and DraftFCB indicate that IPG has the ability to fix it as well. IPG also reinforced positive drivers for agencies overall, including being a global growth industry, the new world of complexity driven by technology and consumer behavior, and emerging markets. Deutsche Bank has a $15 PT and Buy rating on IPG IPG closed Tuesday at $12.10