Margins expanded by 120bps in the quarter and by 100bps for the year. Total earnings on an adjusted basis rose 23% to $1.21/share for the full year. Expectations for 2016 calling for 3-4% organic growth alongside 50bps of margin improvement were conservative, but perhaps appropriately-so given concerns around recession that will inevitably rise in coming months. Management highlighted several reasons for a tempered view, including slow-downs in Brazil and China.

Regional trends were mostly positive during the most recent quarter, as they were through most of 2015. In the United States, organic revenues were up +6.6% on the quarter and +6.8% on the full year, while UK organic revenues were up +7.0% vs. 4Q14 and up 6.6% vs. the full year 2014 despite a significant prior year growth rate of +10.6%. Latin America was up decently at +5.5% despite strong prior year comparables. APAC was also strong at +7.9% on difficult comparables. Continental Europe was generally soft again, falling by -0.8% organically and building slightly on declines observed in the same period last year. For all of 2015, continental Europe saw organic growth of only +1.4%.

The combination of strong revenue growth and rapid margin expansion is in stark contrast with results from Omnicom, for example, where revenue growth has been typically strong, but margin growth virtually non-existent (although we note that Omnicom has indicated expectations for this trend to change in 2016). In 2016, the holding company should achieve 12% OI margins or better.

We expect recent trends to continue favorably for IPG, especially given a strong new business record once again in 2015, although we are also mindful about risks associated with an economic downturn. Foreign exchange will also restrain growth, presenting a headwind the company expects will be around -2.5% at current rates. The more meaningful area of concern we have for IPG is at an industry level, where the sector as a whole faces some risks from the transparency issue the industry is continuing to explore. Marketers and investors may look at all agencies through the same lens despite tangible differences between each holding company's business practices. IPG is likely the least exposed to areas of concern among its peers.

Following these results we are making minor modifications to our model and maintaining our YE2016 price target on IPG at $24. We continue to rate IPG Buy.

VALUATION: Our valuation of IPG is derived using a DCF methodology which equates to 18x 2016 earnings, driven by mid-teens growth in profit and cash flow in subsequent years.

RISKS: Agency risks relate to blowback from the rebate issue, squeezing fees from clients, competition from adjacent industries, reduced competition between marketers and demand for advertising services.


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