4. Icahn Enterprises (NASDAQ:IEP)
Average Upside Potential as of November 21: 125.49%
Icahn Enterprises (NASDAQ:IEP) is a diversified holding company that operates across multiple sectors, including investment, energy, automotive, food packaging, real estate, home fashion, pharmaceuticals, railcar, mining, and metals. Its investment segment manages proprietary capital through various private investment funds. The energy division refines and markets fuels and manufactures fertilizers. It also engages in automotive repair services and real estate leasing and development.
The company’s value decreased in the third quarter of 2024, dropping by $423 million. Revenue in Q3 was lower than Street expectations and dropped 25.69% as compared to the year-ago period, recording an amount of $2.22 billion. While some investments, like the investment funds, performed well, up 8% year-over-year, others, such as CVR Energy and the auto service business, struggled.
Icahn Enterprises (NASDAQ:IEP) is actively taking steps to improve its auto service business, including making management changes. In Q3, the Auto segment saw a $70 million decrease in net sales and other revenues year-over-year. Automotive services revenues declined by $51 million due to operational issues such as insufficient inventory, staffing levels, and reduced consumer spending on automotive repairs and maintenance. The aftermarket parts business contributed to a $20 million decrease in revenue.
The recent management changes in the auto segment are already yielding positive results, with a significant reversal in revenue trends. Icahn Enterprises (NASDAQ:IEP) believes in its long-term strategy and expects to generate strong returns for shareholders in the future.
Here is what CrossingBridge Advisors has to say about Icahn Enterprises L.P. (NASDAQ:IEP) in its Q3 2022 investor letter:
“Icahn Enterprises LP, headed by investor Carl Icahn, is a diversified holding company with interests in investments, energy, automotive, food packaging, real estate, home fashion and pharmaceuticals. The investment segment derives revenues from gains and losses from investment transactions. Other operating segments, in most cases, are independently operated businesses obtained through a controlling interest.
As of 2Q22, Icahn Enterprises had Indicative Net Asset Value of $6.6 billion, consolidated debt of $7.1 billion and total liquidity, comprised of cash, investment funds and revolving credit availability, of $7.2 billion. Moreover, as of the end of 3Q22, it had an equity market capitalization of $16.0 billion. Thus, we have no concern regarding credit quality. We have traded in and out of the IEP 4.75% senior unsecured bond, due September 2024, since it was issued in February 2020.
In 3Q22, amidst the downdraft in the high yield market, we were able to purchase these bonds at a yield to maturity over 8.20%, very attractive for a 2-year note with such strong credit quality. Purchased at a discount, the bond would have an even higher annualized total return were the company to redeem it prior to September 15, 2023, when it becomes a current obligation. We expect to continue adding to this position opportunistically.”
