How are energy investors positioned?
Icahn Enterprises (NASDAQ:IEP) LP reported a surprising earnings per share (EPS) loss of $0.19 for Q4 2024, missing analyst expectations of a $0.18 gain. Despite this, the company exceeded revenue forecasts, reporting $2.37 billion against a $2.27 billion estimate. The stock price saw a minor decline of 0.19% in pre-market trading, reflecting investor concerns over the unexpected EPS miss. The company maintains its position as a significant dividend payer with a 19.49% yield, having maintained dividend payments for 20 consecutive years.
According to InvestingPro, analysts expect the company to return to profitability this year. InvestingPro offers 8 additional key insights about Icahn Enterprises that could help investors make informed decisions.
Key Takeaways
- Icahn Enterprises reported an unexpected EPS loss, missing forecasts by $0.37.
- Revenue exceeded expectations by $100 million, reaching $2.37 billion.
- The stock price fell 0.19% pre-market, reflecting investor caution.
- The company maintained strong liquidity with $4.1 billion at the holding company.
- Strategic moves in automotive and energy sectors highlight future potential.
Company Performance
Icahn Enterprises faced a challenging Q4 2024, with a notable decrease in net asset value by $223 million. Despite this, the company maintained a robust cash position, ending the quarter with $1.4 billion at the holding company and an additional $915 million in funds. With a current ratio of 1.74, InvestingPro analysis shows the company’s liquid assets comfortably exceed short-term obligations. The automotive segment is undergoing restructuring, and the energy segment reported improved EBITDA year-over-year.
Financial Highlights
- Revenue: $2.37 billion, up from a forecast of $2.27 billion.
- Earnings per share: -$0.19, missing the forecast of $0.18.
- Total (EPA:TTEF) liquidity: $4.1 billion at the holding company.
Earnings vs. Forecast
Icahn Enterprises reported an EPS loss of $0.19, significantly missing the forecasted gain of $0.18. This represents a negative surprise of approximately 305%. Despite the EPS miss, revenue exceeded expectations by 4.4%, marking a positive note in the company’s financial performance.
Market Reaction
The stock experienced a slight decline of 0.19% in pre-market trading, with shares priced at $10.26 at the last close. The stock remains within its 52-week range, with a high of $20.25 and a low of $8.53. With a beta of 0.74, the stock shows lower volatility than the broader market. Trading at an EV/EBITDA multiple of 23.08x, InvestingPro’s Fair Value analysis suggests the stock is currently fairly valued. The minor price drop suggests cautious investor sentiment, likely driven by the unexpected EPS loss.
Outlook & Guidance
Looking forward, Icahn Enterprises remains focused on its activist investment strategy, with expectations of automotive segment normalization by the second half of 2025. While analysts forecast a 16% revenue decline for the current year, the company aims to capitalize on significant opportunities in the utility and services sectors, leveraging its strong liquidity position. For deeper insights into IEP’s growth prospects and strategic initiatives, investors can access the comprehensive Pro Research Report, available exclusively on InvestingPro.
Executive Commentary
CEO Andrew Tano emphasized the company’s strategic focus, stating, "We have a significant war chest to take advantage of opportunities as they arise." He also highlighted the company’s commitment to its activism strategy, noting, "We are intensely focused on our activism strategy."
Risks and Challenges
- Market volatility could impact investment fund performance.
- The automotive segment’s restructuring poses execution risks.
- Energy segment margins remain under pressure due to fluctuating crack spreads.
- Legal uncertainties in small refinery exemption litigation.
- Potential macroeconomic pressures on real estate valuations.
Q&A
During the earnings call, analysts inquired about the company’s hedge fund positioning and real estate valuation methodology. Executives clarified property sale and revaluation details, emphasizing a focus on maximizing asset value.
Full transcript - Icahn Enterprises LP (IEP) Q4 2024:
Operator: Good morning, and welcome to the Icahn Enterprises LP Fourth Quarter twenty twenty four Earnings Call. At this time, all participants are in a listen only mode. We’ll have Andrew Tano, President and CEO Ted Papapostolo, Chief Financial Officer and Robert Flint, Chief Accounting Officer. I would now like to hand the call over to Robert Flint, who will read the opening statement.
Robert Flint, Chief Accounting Officer, Icahn Enterprises LP: Thank you, operator. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward looking statements we make in this presentation, including statements regarding our future performance and plans for our businesses and potential acquisitions. Forward looking statements may be identified by words such as expects, anticipates, intends, plans, believes, seeks, estimates, will or words of similar meaning and include, but are not limited to statements about the expected future business and financial performance of Icahn Enterprises, LP and its subsidiaries. Actual events, results and outcomes may differ materially from our expectations due to a variety of known and unknown risks, uncertainties and other factors that are discussed in our filings with the Securities and Exchange Commission, including economic, competitive, legal and other factors. Accordingly, there’s no assurance that our expectations will be realized.
We assume no obligation to update or revise any forward looking statements should circumstances change except as otherwise required by law. This presentation also includes certain non GAAP financial measures, including adjusted EBITDA. A reconciliation of such non GAAP financial measures to the most directly comparable GAAP financial measures can be found on the back of this presentation. We also present indicative net asset value. Indicative net asset value includes, among other things, changes in the fair value of certain subsidiaries, which are not included in our GAAP earnings.
All net income and EBITDA amounts we will discuss are attributable to Icahn Enterprises unless otherwise specified. I’ll now turn it over to Andrew Tino, our Chief Executive Officer.
Andrew Tano, President and CEO, Icahn Enterprises LP: Thank you, Rob, and good morning, everyone. NAV decreased $223,000,000 from the third quarter of twenty twenty four. The two big events during the quarter were the decline in CVR Energy (NYSE:CVI) and an agreement to sell certain properties in our Real Estate segment. CVI declined by $286,000,000 in the quarter. As we discussed on the last call, crack spreads weakened in the fourth quarter and when combined with a large turnaround led CVI to cut its dividend.
In response to what we believed was an attractive investment opportunity, we launched a tender offer and were successful in purchasing 878,000 shares. This is less than we had hoped for, but we will remain price sensitive and monitor conditions going forward. Recently, crack spreads have improved off their loads, which bodes well for CVI. In addition, we are excited that the change in administration may lead to the resolution of our outstanding litigation regarding small refinery exemptions, which has the potential to remove over $300,000,000 or more of liabilities. As a reminder, during the last Trump administration, Wynnewood received small refinery exemptions.
Our Real Estate segment increased $292,000,000 in the quarter. The increase was due to a combination of a sale of certain properties, which led us to fair value the remaining assets, a change from how we have valued these assets in prior periods. The GAAP equity attributable to IEP in real estate held steady. The investment funds were down approximately 1.6% for the quarter. The biggest decliner was our investment in Caesars (NASDAQ:CZR) and the largest gainer were our refinery hedges.
We ended the quarter with $1,400,000,000 of cash and cash equivalents at the holding company and an additional $915,000,000 of cash at the funds. So as Carl likes to say, we have a significant war chest to take advantage of opportunities as they arise. Lastly, the Board has maintained the quarterly distribution at $0.5 per depository unit. Now turning to our Investment segment. In terms of our top five disclosed names, we see considerable value creation potential.
At SWIX, we see a gas utility that is closing its ROE gap to peers and separating a utility services business with significant growth opportunities. We see upside in both the gas utility and the services business. At AEP, we see new management closing its ROE gap, improving regulatory outcomes and benefiting from tremendous growth in electricity demand due to AI driven data center demand. AEP recently announced the sale of a 20% stake in a portion of its transmission business, which helped to improve the balance sheet and was equivalent to issuing shares at a 70% premium to the then share price. At Caesars, Carl has significant respect for Tom Reeg and what he has accomplished.
We believe we are buying a great business with tremendous real estate value, a great management team that is actively buying back shares and with a growing digital business, all at a free cash flow yield greater than 15%. IFF is a high quality ingredients company that should see improving organic revenue growth and increasing margins from new management. IFF trades at a significant discount to its peers on EV to EBITDA. At Bausch, we see considerable value both at BHC and BLCO. The funds ended the quarter approximately 22% net long.
Adjusting for our refining hedges, the fund was 35% net long. And now I will pass it on to Ted to cover our controlled businesses.
Ted Papapostolo, Chief Financial Officer, Icahn Enterprises LP: Thank you, Andrew. I will start at our Energy segment. Energy segment EBITDA was $99,000,000 for Q4 twenty twenty four compared to $2.00 $4,000,000 in Q4 twenty twenty three. This decrease was driven by reduced throughput and lower crack spreads. Q4 twenty twenty four refining margin per throughput barrel was $8.37 compared to $15.01 in the prior year quarter.
The main drivers for the decrease is due to lower crack spreads and unfavorable market derivative and inventory valuations. Q4 twenty twenty four renewable margin per vegetable oil throughput gallon was $0.79 compared to a loss of $0.9 in the prior year quarter. The drivers for the increase were lower cost of sales and an increase in the HOGO spread. Q4 twenty twenty four average realized gate prices for UAN declined by 5% to $229 per tonne and ammonia increased by 3% to $475 per tonne when compared to the prior year quarter. Now turning to our Automotive segment.
Our Automotive business continues to lag compared to prior year results due to the self inflicted wounds we discussed previously. We have recently announced a permanent CEO who has implemented new initiatives and strategies to remediate the short term challenges we are currently experiencing. Management’s plan anticipates these challenges will be resolved and their results to be normalized by the second half of twenty twenty five. During the quarter, a significant tenant in our automotive real estate portfolio made a strategic decision to exit certain locations. We received an early termination payment of $42,000,000 and we have begun marketing these locations to prospective tenants and expect to fill them within the next twenty four months.
We have substantially completed the exit of our aftermarket parts business, which will be completed by the end of Q1 twenty twenty five. Now turning to our other segments. Real Estate Q4 twenty twenty four adjusted EBITDA decreased by $5,000,000 compared to the prior year quarter, driven by reduced sales of single family homes. Food Packaging (NYSE:PKG)’s adjusted EBITDA attributable to IEP decreased by $6,000,000 for Q4 twenty twenty four as compared to the prior year quarter. Volumes have increased, however, a shift in product mix and lower pricing led to a reduction in net sales.
As previously mentioned, there are opportunities to improve efficiency at the plants. However, we do not expect a meaningful impact until we execute a capital plan to modernize equipment and reduce the overall cost structure. Home Fashion’s adjusted EBITDA increased by $2,000,000 as compared to the prior year quarter, mainly driven by lower material costs and improved manufacturing efficiencies. Pharma segment’s adjusted EBITDA for Q4 twenty twenty four improved by $1,000,000 as compared to the prior year quarter, mainly due to higher prescription growth. Recently, one of our developmental therapies cleared a significant FDA milestone and we have begun preparing for clinical trials.
Now turning to our liquidity. We maintain liquidity at the holding company and at each of our operating subsidiaries to take advantage of attractive opportunities. As of quarter end, the holding company had cash and investment in the funds of $4,100,000,000 and our subsidiaries had cash and revolver availability of $1,500,000,000 In summary, we continue to focus on building asset value and maintaining liquidity to enable us to capitalize on opportunities within and outside our existing operating segments. Thank you. Operator, can you please open up the call for questions?
Operator: Thank you so much. And as a reminder to our tele audience, It comes from the line of Andrew Berg with Post Advisory Group. Please proceed.
Andrew Berg, Analyst, Post Advisory Group: Thank you. Yes, just a couple of questions. With respect to the hedge funds, you guys ended with a net notional loan of 22% and I think you said it was 35% ex the energy hedges. Can you remind me where you were at the end of the third quarter? Because I think overall the fund was net short 2%.
I don’t recall what the figure was, actually energy hedges. And are you able to provide any commentary as to what point in the quarter you had flipped that position from being slightly negative to obviously much greater percentage long now?
Andrew Tano, President and CEO, Icahn Enterprises LP: Yes. Hey, Andrew. Good morning. Good morning.
Andrew Berg, Analyst, Post Advisory Group: So if
Andrew Tano, President and CEO, Icahn Enterprises LP: you look at the hedge fund and you think about some of the hedges that are in there, a lot of them are due to the refining hedges. And if you looked at crack spreads and I guess just in general how the refining hedges traded, when we see crack spreads come down, that’s our time to take off some of those hedges. And as crack spreads go up or other refiners go up, that’s when we put them back on. So it’s just being opportunistic, I’d say.
Andrew Berg, Analyst, Post Advisory Group: Okay. So at the end of the third quarter, can you I don’t know if you have it in front of me or we need to follow-up afterwards where you were, what that net 2% short was once we take the hedges out where you were?
Andrew Tano, President and CEO, Icahn Enterprises LP: Yes, we can follow-up right after the call if you’d like.
Andrew Berg, Analyst, Post Advisory Group: Okay, great. And then with respect to the Real Estate segment, you had a pretty significant adjustment to the indicative net asset value for that segment. Can you kind of walk us through what was causing that jump? I know in the footnote it talks about, I guess, some valuation third party valuation work. But can you kind of give us a little bit better understanding where that was and how that came about and what were the underlying drivers for such a significant increase?
Andrew Tano, President and CEO, Icahn Enterprises LP: Yes.
Ted Papapostolo, Chief Financial Officer, Icahn Enterprises LP: Hey, Andrew, it’s Ted. Yes, so prior to December 31, we felt that GAAP book value was a good proxy for indicative asset value for this segment. And what changed in the fourth quarter is we signed an agreement to sell certain properties that far exceeded the book value. So due to this event, we felt that the GAAP book value no longer represents the indicative fair value. So as a result, we mark these properties to the anticipated sales price and to be consistent for the remaining assets within the segment, we just obtained appraisals and mark those properties accordingly.
So that’s what you would see the big jump of the driver is really like $2.90, but you’ll see the actual absolute value is about 300 quarter over quarter.
Andrew Berg, Analyst, Post Advisory Group: What was the composition of those properties?
Ted Papapostolo, Chief Financial Officer, Icahn Enterprises LP: You mean the fair value jump? So the ones we have a sale agreement in place, I would say it’s about approximately a $200,000,000 increase due to those properties and the rest of the portfolio just broad strokes is about $90,000,000
Andrew Berg, Analyst, Post Advisory Group: But then was this
Andrew Tano, President and CEO, Icahn Enterprises LP: And some going down. Yes, that’s the next question.
Andrew Berg, Analyst, Post Advisory Group: Was this primarily raw land or was it retail, office, industrial? I’m just trying to get a better sense, single family home of what was the underlying assets that were so much higher than where you had them marked?
Andrew Tano, President and CEO, Icahn Enterprises LP: I think we mentioned on the last call that there was some properties that we were looking at. I think it’s at the press.
Andrew Berg, Analyst, Post Advisory Group: Say that again, I’m sorry.
Andrew Tano, President and CEO, Icahn Enterprises LP: Yes, we mentioned it on our last call, that we were exploring sale of certain properties. So I think if you were to reference those comments, you’d see where they are.
Andrew Berg, Analyst, Post Advisory Group: Okay. I’ll go back and look. I don’t recall what type of properties those were. Thank you.
Ted Papapostolo, Chief Financial Officer, Icahn Enterprises LP: Okay.
Operator: Thank you. All right. As I see no further questions in the queue, I will turn it back to Andrew Tenno for final remarks.
Andrew Tano, President and CEO, Icahn Enterprises LP: Thank you. So I’d like to leave with a reminder that here at ICON Enterprises, we are intensely focused on our activism strategy. We have unique advantages, including the ICON brand name and a long history and willingness to wage proxy contests. It is this track record, which frequently allows us to be invited to join boards and work cooperatively with our fellow directors to make the key changes that will drive shareholder value. Furthermore, given our balance sheet, liquidity and permanent capital structure, we have the ability to tender for entire businesses, a tool most simply do not possess.
Though our returns can be lumpy and dissatisfying at times, as we continue to focus on our activist efforts at both our investment segment and controlled businesses, we believe they will bear fruit for all unitholders. We’ll speak soon. Bye.
Operator: Thank you. And with that, we thank you all for participating and you may now disconnect.
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