07. Brookfield Business Partners L.P. (NYSE:BBU)
Upside Potential: 60%
Average Analyst Share Price Target: $30.86
Brookfield Business Partners L.P. (NYSE:BBU) offers an upside potential of 60%, with analysts assigning an average share price target of $30.86. Brookfield Business Partners L.P. (NYSE:BBU) offers a diverse portfolio with strong fundamentals across its business services, infrastructure, and industrial operations segments. While recent financial results showed a slight earnings miss with a reported EPS of -$0.09 compared to the expected $0.86, the company remains well-positioned for long-term growth. The dip in earnings was largely attributed to one-time events, including a cybersecurity incident at its CDK Global operation and increased costs in a construction project nearing completion. Despite these short-term setbacks, Brookfield Business Partners L.P. (NYSE:BBU) continues to demonstrate resilience by focusing on value creation and operational improvements across its business segments. Its access to capital has enabled it to refinance $11 billion in debt, reducing borrowing costs and improving future profitability. The company’s proactive approach to monetizing mature businesses has generated $3 billion in proceeds over the past 1.5 years, showcasing its ability to strategically recycle capital for growth.
Brookfield Business Partners L.P. (NYSE:BBU) diversified portfolio includes stable, cash-generating businesses that provide mission-critical services. The company’s efforts to improve its operations and capitalize on value opportunities place it in a strong position for future performance. Its focus on cybersecurity, cost management, and debt reduction highlights a sound management approach. Given its robust fundamentals, strategic initiatives, and a history of realizing strong returns, Brookfield Business Partners L.P. (NYSE:BBU) offers investors a promising long-term value proposition.
Emeth Value Capital made the following comment about Brookfield Business Partners L.P. (NYSE:BBU) in its Q2 2023 investor letter:
“Brookfield Corporation has $5.5 billion invested through Brookfield Business Partners L.P. (NYSE:BBU), a publicly traded permanent capital vehicle that invests in industrials and business services companies. The group spun off from Brookfield in 2016 and was seeded with sixteen existing private equity investments across industrials, construction, oil and gas, and business services. Notable holdings included GrafTech, the leading producer of graphite electrodes, and Multiplex, a prominent Australian construction company. The portfolio value at inception was $2.5 billion, and Brookfield retained seventy-eight percent ownership. To date, under the leadership of Cyrus Madon, Brookfield Business Partners has realized $5.5 billion in proceeds while generating an average four times multiple on capital and thirty percent IRR across twelve concluded investments. In addition, the partnership has executed more than twenty new investments, totaling $8.0 billion in deployed capital, over the last seven years. What’s more, the quality of portfolio companies improved meaningfully over this time as proceeds were recycled from the sale of smaller, more cyclical businesses to fund the acquisition of larger businesses with increased scale, significant barriers to entry, and more resilient cash flows. For instance, the four largest companies within the current portfolio – Nielsen, Clarios, Sagen, and CDK Global – generate over ten times the cash flow of the four largest companies in 2016. However, what has remained unchanged over the years is Brookfield’s intense operational approach. At the outset of each investment, Brookfield crafts a detailed value creation plan, which, given the capital structure often employed in leveraged buyout transactions, has an outsized influence on shareholder outcomes. For example, over the last five years on an average equity capital base of less than $5.0 billion, Brookfield Business Partners has improved EBITDA at its underlying companies by $275 million. In other words, these improvements, which are often implementable regardless of the macro environment, added $2.75 billion in net asset value at a ten times multiple. Likewise, Brookfield has plans in motion across its portfolio companies to surface an additional $500 million in EBITDA over the coming years, which has the potential to significantly increase the existing $8.5 billion net asset value. Indeed, when coupled with natural deleveraging, these initiatives provide visibility to a base return of 1.7x – 2.0x, or approaching $11 billion for Brookfield Corporation’s share over the coming monetization cycle.”
