(Reuters) - U.S. ad firm Interpublic Group of Cos Inc (IPG.N) raised concerns of a challenging second half on Tuesday, as it followed bigger rival Omnicom Group Inc (OMC.N) in keeping full-year outlook unchanged despite reporting an upbeat quarter.
Interpublic’s shares fell 3% in morning trade, while those of Omnicom were down 1.5%.
Like Omnicom, Interpublic profit for the three months ended June 30 beat analysts’ expectations, as it won more customers and international clients increased their spends.
New York-based Interpublic reported a 3% rise in net organic revenue - a widely watched measure that excludes fluctuation in foreign exchange rates and mergers. Analysts on average had expected a 2.9% rise, according to research firm FactSet.
European rival Publicis (PUBP.PA), however, had reported a weaker-than-expected second quarter and cut its 2019 revenue growth guidance.
The company said its international organic revenue rose 6.5%, much above estimates of 3.1%, and ahead of Omnicom’s 2.8%.
While Interpublic is set to meet organic growth target at the high end of 2%-3%, the headwinds get a little worse in the second half and runs a little bit into the first quarter of next year, Interpublic Chief Executive Michael Roth said on a conference call with analysts.
Excluding items, Interpublic earned 46 cents per share, beating the average analyst estimate of 44 cents per share, according to IBES data from Refinitiv.
Net income available to Interpublic’s common stockholders rose to $169.5 million, or 43 cents per share, in the June quarter from $145.8 million, or 37 cents a share, a year earlier.
Net revenue rose to $2.13 billion from $1.95 billion but missed analysts’ estimates of $2.14 billion.
THE DIGITAL CATCH-UP
Traditional advertisers such as Interpublic have been losing ground to new technology and software giants, such as Facebook (FB.O) and Alphabet Inc’s Google (GOOGL.O), especially in the United States, one of the largest markets for these companies.
Total digital ad spending in the U.S. will grow 19% to $129.34 billion this year, exceeding traditional medium for the first time, and accounting for 54.2% of the total spending, according to data here from research firm eMarketer.
The company, home to Madison Avenue icon McCann, last year lost the media business of Fiat Chrysler Automobiles to Publicis and U.S. Army’s marketing contract to Omnicom.
“This was also where we have begun to see the impact of the revenue headwinds from McCann’s loss last year,” Chief Financial Officer Frank Mergenthaler said.
Reporting by Sayanti Chakraborty and Supantha Mukherjee in Bengaluru; Editing by Rashmi Aich