Stagwell tumbles 11% on Q4 earnings miss, guidance below consensus

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Stagwell tumbles 11% on Q4 earnings miss, guidance below consensus
Credit: © Reuters.

NEW YORK - Stagwell Inc ( NASDAQ : STGW) reported fourth-quarter earnings that fell short of Wall Street's expectations, with adjusted earnings per share (EPS) of $0.12, which was $0.16 below the analyst estimate of $0.28. The stock fell 11.1% in premarket trading.

The marketing and communications network's revenue for the quarter was also below the consensus, coming in at $654.8 million compared to the expected $684.84 million.

For the full year 2024, Stagwell anticipates adjusted EPS to be in the range of $0.75 to $0.88, which is below the analyst consensus of $0.91. The company also expects organic net revenue growth of 5% to 7%, with organic net revenue excluding advocacy growth projected at 4% to 5%.

Adjusted EBITDA is forecasted to be between $400 million and $450 million, with free cash flow conversion at approximately 50%. The guidance assumes no impact from foreign exchange, acquisitions, or dispositions.

Stagwell's Chairman and CEO, Mark Penn, commented on the past year's performance, stating, "Despite a challenging year for marketing services and digital transformation—accentuated by our client mix—Stagwell grew share with some of our largest customers in 2023, took prudent steps to manage our costs, and invested in digital innovation to stay ahead of the future of marketing." He also highlighted the return to sequential net revenue growth in Q4 and the sale of a non-core asset for significantly above the initial investment.

Chief Financial Officer Frank Lanuto added that the company faced ongoing macroeconomic headwinds during the fourth quarter and responded with decisive actions to align costs with revenues, resulting in an adjusted EBITDA margin of 17 percent. He also noted that Stagwell delivered the $30 million in synergies promised at the time of their merger in 2021 ahead of schedule.

Looking forward, Penn expressed optimism for 2024, citing the political season and the launch of AI and AR products, including the inclusion of ARound into Major League Baseball's native Ballpark app, as opportunities for growth and expanded margin.

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