In this article, we will take a look at the 5 spin-off companies in 2023. To see more such companies, go directly to 13 Spin-off Companies in 2023.
5. Knife River Corporation (NYSE:KNF)
Number of Hedge Fund Holders: 27
MDU Resources Group Inc. (NYSE:MDU) earlier this year completed the spinoff of its construction materials subsidiary, Knife River Corporation (NYSE:KNF). The construction material company’s stock received an Outperform rating in August from Oppenheimer. The firm said Knife River Corporation (NYSE:KNF) is poised to grow amid increasing spending on roads and infrastructure.
Oppenheimer said:
“Knife River Corporation (NYSE:KNF) operates in a highly attractive industry; aggregates and construction materials are critical to public and private construction projects and bountiful tailwinds exist, including significant state and federal infrastructure spending, meaningful population growth and a dearth of housing stock.”
4. Kenvue Inc. (NYSE:KVUE)
Number of Hedge Fund Holders: 31
Kenvue Inc. (NYSE:KVUE) was perhaps one of the biggest spinoffs of 2023. Johnson & Johnson (NYSE:JNJ)’s unit, which is now publicly trading, raised $3.8 billion through the largest US initial public offering since 2021.
During the second quarter earnings call Kenvue Inc. (NYSE:KVUE)’s management talked about the state of business and also discussed guidance:
“Further, our first half 2023 results benefited from a couple of one-time-in-nature dynamics that we would not expect to continue in the second half. First, our Q1 results were supported by higher-than-normal inventory replenishment, primarily in Self Care and Skin Health and Beauty. This was a result of our retail customers exiting Q4 with lower-than-average inventory levels, generating outsized orders during the quarter as they looked to restock. Second. Globally, there has been an exceptionally strong cold, cough and flu season throughout the first half of the year. While we will be operationally ready for any level of seasonal demand, our outlook contemplates more normal incident rate levels this coming winter. With regards to interest, we expect reported net interest expense to be approximately $270 million and approximately $300 million on an adjusted basis.
Moving to taxes. With regards to the full year, we expect a reported effective tax rate of 34.5% to 35.5%. On an adjusted basis, we expect the range to be between 24.5% and 25.5%. The higher rate versus prior year is primarily driven by jurisdictional mix of earnings and less favorable discrete benefits in 2023 as compared to 2022. On the bottom line, we expect full year adjusted diluted EPS to be in the range of $1.26 to $1.31. This range assumes a full year 2023 weighted average share count of 1.855 billion shares. As we look to the back half, we continue to operate in a challenging environment with ongoing pressures from labor costs, raw materials, packaging and foreign exchange volatility. While our guidance reflects a variety of scenarios, we remain focused on the things that we can control and will utilize the levers within our operating model to mitigate these headwinds.”
Read the full earnings call transcript here.
3. Madison Square Garden Entertainment Corp. (NYSE:MSGE)
Number of Hedge Fund Holders: 36
Live entertainment company Sphere Entertainment Co. spun off Madison Square Garden Entertainment Corp. (NYSE:MSGE) earlier this year. In August, BofA started covering Madison Square Garden with a Buy rating. The firm called the stock a “growth-oriented, pure play on live entertainment.”
BofA analyst Peter Henderson said that spun off company is an “attractive opportunity” for investors who want to own a live entertainment company, thanks to its solid market position.
As of the end of the second quarter of 2023, 43 hedge funds tracked by Insider Monkey had stakes in Madison Square Garden Entertainment Corp. (NYSE:MSGE).
Ariel Small Cap Value Strategy made the following comment about Madison Square Garden Entertainment Corp. (NYSE:MSGE) in its Q2 2023 investor letter:
“Additionally, live entertainment business, Madison Square Garden Entertainment Corp. (NYSE:MSGE) completed its spin-off from Sphere Entertainment Co. (SPHR) in the quarter. The company’s portfolio includes a collection of venues, such as New York’s Madison Square Garden, Radio City Music Hall, Beacon Theatre and The Chicago Theater. MSGE also features the original production of the Christmas Spectacular starring the Radio City Rockettes. In our view, MSGE’s assets are stable cash flow generators and should enable deleveraging. At current valuation levels, the company is trading at an attractive 40% discount to our estimate of private market value.”
2. Crane NXT, Co. (NYSE:CXT)
Number of Hedge Fund Holders: 42
In April, Crane NXT, Co. (NYSE:CXT) was spun off from Crane Company and announced that it’d start trading independently under the ticker symbol CXT. The now standalone cash/payments business provides key technologies to empower the backend of payment transactions. Its Crane Payment Innovations segment accounts for about 65% of the firm’s revenue.
In August Crane NXT, Co. (NYSE:CXT) posted second quarter results. Second quarter EPS came in at $1.12 beating estimates by $0.21. Revenue in the period jumped 5.5% year over year to $352.4 million, beating estimates by $15.87 million.
The company’s management talked about the spin-off and the company’s path ahead in an earnings call and said:
“Now that the separation is complete, Crane Company is a streamlined and more focused leading technology business. The market’s reaction since we announced the separation in March of last year, validates our strategy with substantial value already unlocked and we are confident that even more significant value creation lies ahead. The new Crane Company, as we described on Investor Day, has about $2 billion in sales and $335 million in adjusted EBITDA this year, a 4% to 6% long-term core sales growth rate from resilient and durable businesses that derive about 40% of strategic growth platform sales from the aftermarket, with substantial operating leverage on top of already solid margins today, and that should lead to double-digit average annual core profit growth with potential upside from capital deployment and starting with net debt to EBITDA at about 0.2 times the capital deployment opportunity is significant.”
Read the complete earnings call here.
1. GE HealthCare Technologies Inc. (NASDAQ:GEHC)
Number of Hedge Fund Holders: 44
GE HealthCare Technologies Inc. (NASDAQ:GEHC) was spun off from General Electric (NYSE:GE) earlier this year. Year to date GE HealthCare Technologies Inc. (NASDAQ:GEHC) has gained about 18% through August 12. GE HealthCare Technologies Inc. (NASDAQ:GEHC) and Boston’s Mass General Brigham hospital group said they have developed an AI algorithm for radiology scheduling with an ability to predict missed or late appointments with up to 96% accuracy.
Hedge funds were quick to pile into GE HealthCare Technologies Inc. (NASDAQ:GEHC), as Insider Monkey’s database of 910 hedge funds shows that 44 hedge funds reported owning stakes in GEHC.
VGI Partners made the following comment about GE HealthCare Technologies Inc. (NASDAQ:GEHC) in its second quarter 2023 investor letter:
“GE HealthCare Technologies Inc. (NASDAQ:GEHC) is a global medical technology leader in the Imaging, Ultrasound and Patient Monitoring space. Having initiated a position shortly after it was spun out of parent company GE in late 2022, the stock has become one of our core holdings. We will discuss the investment thesis and upside potential in greater detail later in this letter.
One of our recent new investments is GE HealthCare (GEHC), which was spun out from General Electric (GE) in late 2022. Currently it is our third largest position due to a combination of strong performance and growing the weight (we initiated a position when the company was spun off).
GEHC is a leader in Imaging and Ultrasound machines, which includes PET and CT scans, MRI, X-Ray and ultrasounds – these account for nearly three quarters of revenues. GEHC is a global business with revenues well spread between the US, Europe, China and emerging markets. The business model is both predictable and resilient in our view:…” (Click here to read the full text)
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