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Interpublic sees US headwind of 4.8% in Q3 due to large account losses

Feeling the impact of key account losses, Interpublic Group of Cos. Inc. saw organic revenue recede at its U.S. operations during the third quarter.

Facing a tough comparison as the ad agency holding company's U.S. unit posted organic growth of 5.0% in the third quarter of 2018, Interpublic sustained a 0.6% decline with the metric in the most recently completed period.

Interpublic CEO Michael Roth told analysts on an Oct. 22 earnings call that account losses year over year resulted in a U.S. headwind of 4.8% in the third quarter. Late in 2018, Interpublic saw such big clients as the U.S. Army and Fiat Chrysler Automobiles NV migrate to other advertising companies. Interpublic replaced the aforementioned large accounts with smaller clients, he said.

"It's a bunch of doubles and singles as opposed to home runs, but we're doing a pretty good job at that, which is why we're net new business positive in the U.S.," said Roth, who called the U.S. "a healthy market" for Interpublic.

In the U.S., which represents 64% of the holding company's overall business, revenue improved 13.1% to $1.31 billion, despite the aforementioned 0.6% decline in organic revenue.

Revenue during the three months ended Sept. 30 grew 8.7% to $2.06 billion from the third quarter of 2018. Total revenue, including billable expenses of $376.7 million, rose 6.1% to $2.44 billion.

Interpublic, on Oct. 1, 2018, completed the $2.3 billion acquisition of Acxiom, which collects and distributes information from customers around the world. Acxiom will contribute to Interpublic's organic revenue in the fourth quarter.

Internationally, organic revenue was up 4.5%, as total revenue edged up 1.9% to $748.4 million from $734.8 million.

Relative to client sectors, Interpublic posted global increases in healthcare, financial services, retail, tech and telecom, as well as consumer goods. Conversely, the auto and transportation sector decreased, said Roth.

Net income available to Interpublic common stockholders was $165.6 million, or 42 cents per share, up from $161.0 million, or 41 cents per share, in the year-ago period. Results reflected after-tax amortization of acquired intangibles of $17.5 million and an after-tax loss of $7.7 million on the divestitures of businesses.

The S&P Global Market Intelligence consensus EPS estimate for the third quarter was 47 cents on a normalized basis and 44 cents on a GAAP measurement.