NEW YORK -- A Citi analyst on Tuesday upgraded Interpublic Group of Cos. to "Buy" from "Neutral," saying that the company is poised to rebound next year after a tough 2012.
THE BACKGROUND: Interpublic, along with other advertising companies, had a rough time this year. In July the New York-based holding company for advertising and marketing agencies said its second-quarter net income fell 3 percent, hurt by some U.S. account losses in 2011 and the stronger dollar.
At that time Interpublic cautioned that the global economic situation was uncertain, but it expected stronger growth in the second half of the year. The company is scheduled to report its third-quarter results on Oct. 26.
THE OPINION: Analyst Leo Kulp raised his price target by $3 to $14, saying that he's optimistic about the company's prospects.
"After a rough 2012, we expect Interpublic to get back on track in 2013 with solid organic growth, margin improvement and meaningful capital returns," Kulp wrote in a note to investors.
He added that while Interpublic's third-quarter results could be soft, it appears that marketing budgets will be up modestly next year and the company will continue to gain market share in certain areas of advertising.
In addition Interpublic could have close to $1 billion in excess cash to return to shareholders next year. That could happen after the company's credit ratings return to investment-grade status, which Kulp said he expects to happen in either the fourth quarter or the first quarter of 2013.
THE SHARES: Interpublic shares jumped 3 percent to $11.77 shortly after the markets opened before falling back to $11.60, amid a broader market decline.