Acknowledging Interpublic Group’s improved profitability and credit metrics, Standard & Poor’s Ratings Services revised its outlook on the company to "positive," from "stable." S&P also affirmed IPG’s corporate credit rating of BB+, which is nearly investment grade.
Last week, the industry’s fourth-largest holding company said its net income in 2011 nearly doubled to more than $520 million, helped in part by the sale of half of IPG’s stake in Facebook in the third quarter.
“The revised outlook reflects the company’s continued progress toward a peer-level EBITDA (earnings before interest, taxes, depreciation and amortization) margin, which stood at 11.9 percent for 2011, up meaningfully from 10.7 percent in 2010,” said S&P credit analyst Michael Altberg.
IPG is planning to issue new senior unsecured notes, due in 2022.
S&P said the positive outlook indicates the potential for a “one-notch upgrade” during the next twelve months if the ratings service becomes confident the company can continue its current financial momentum. Among the parameters for an upgrade, S&P noted: “Continued progress will depend on execution with new business wins and increasing business from existing clients to compensate for certain client losses in 2011.”
In 2011, IPG’s McCann Erickson lost two large, longtime clients. In September, the agency was removed as global creative agency of record for Nestle’s Nescafe brand and it subsequently lost its global creative lead on ExxonMobil in November. In July, corporate sibling Draftfcb lost its second-largest global client S.C. Johnson, which was also one of its oldest.