Ad Giant Delays Results Report
Interpublic Group of Cos. shares tumbled 24% Monday after the world’s largest advertising firm delayed the release of its second-quarter financial results, raising investor concern about accounting issues.
The shares slid $4.69 to $14.99, a five-year low, on the New York Stock Exchange. The company pushed back the report--originally due out today--to Aug. 13, saying in a statement that its audit committee needed to “complete its review prior to management certification of its financial statements.”
“Anytime a company delays an earnings release at the last minute, it raises concerns among investors,” said David Doft, an analyst at CIBC World Markets. “Either it’s nothing or it’s bad, and in this market people sell.”
Under a new Securities and Exchange Commission rule, chief executives and chief financial officers of the 947 largest publicly traded U.S. companies must certify the accuracy of their financial statements. For most firms the deadline for certification is Aug. 14.
As of Friday, fewer than 40 companies had filed certification statements, although more companies did so on Monday, including Los Angeles-based Northrop Grumman Corp., Leggett & Platt Inc., Tellabs Inc., Allete Inc. and Rockwell Collins Inc.
Accounting at Interpublic rival Omnicom Group Inc., the third-largest ad company, came under investor scrutiny in June when the Wall Street Journal reported the company’s merger accounting may understate liabilities. Omnicom and Interpublic built up their marketing services through dozens of acquisitions, leading to complex accounting, analysts said.
As for Interpublic, “My intuition is that it’s not a material issue, but the market is spooked,” said Ron Rimkus, a portfolio manager at Mesirow Financial. He said his company hasn’t been selling the stock.
Interpublic spokesman Philippe Krakowsky declined to comment.
In a statement released late Monday, Omnicom said its CEO and CFO “intend to sign and file, without qualification, the certifications that the SEC is requiring.”
Omnicom in June said it gave the SEC information about its change of auditors and the resignation of two board members this year. The SEC made an informal request for information after Omnicom recently hired KPMG to replace Arthur Andersen, its auditor since 1991.
Omnicom will report second-quarter results today before the opening of U.S. markets.
Meanwhile, Interpublic had been expected to report earnings of 39 cents a share and sales of $1.57 billion, according to the average estimates of analysts surveyed by Thomson First Call.
Shares of Omnicom fell $3.58, or 7.1%, to $47.21 in NYSE trading Monday. The stock has tumbled 47% this year, while Interpublic is off 49%.
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Bloomberg News was used in compiling this report.
