Icahn Enterprises LP (IEP) reported its first-quarter financial results for 2024 with a net loss of $38 million, marking a $232 million improvement over the same quarter in the previous year. The company also noted an increase in adjusted EBITDA to $134 million, up $39 million from Q1 2023.
Indicative net asset value rose to approximately $5 billion, reflecting a $194 million increase from the prior quarter. The earnings call, led by President and CEO Andrew Teno, CFO Ted Papapostolou, and Chief Accounting Officer Robert Flint, revealed mixed performance across various segments and a continued focus on strategic initiatives and cost rationalization.
Key Takeaways
- Icahn Enterprises LP reported a Q1 2024 net loss of $38 million, a significant improvement from Q1 2023.
- Adjusted EBITDA increased to $134 million, up $39 million year-over-year.
- Indicative net asset value reached approximately $5 billion, an increase of $194 million from the previous quarter.
- The company declared a $1 quarterly distribution per depository unit, maintaining consistency with the last quarter.
- Investment funds experienced a negative return primarily due to energy sector and broad market shorts.
- The automotive segment maintained adjusted EBITDA despite reduced car count through cost cutting and margin initiatives.
Company Outlook
- Icahn Enterprises remains focused on activism strategy and believes it will drive shareholder value.
- The company is well-positioned with a strong balance sheet, liquidity, and permanent capital structure to support its investment strategy.
- Opportunities for accretive and attractive deals in the refining space are being explored.
- Auto service division initiatives aim to drive earnings and cash flow, with emphasis on product sourcing and inventory reduction.
Bearish Highlights
- Investment funds had a negative return of 0.8% for the quarter, primarily due to energy sector and broad market shorts.
- The energy segment's EBITDA decreased from $229 million in Q1 2023 to $118 million in Q1 2024.
- Average realized gas prices for UAN and ammonia decreased by 42% and 41%, respectively, compared to the prior year quarter.
Bullish Highlights
- Southwest Gas (NYSE:SWX) Holdings and Century IPO contributed positively to performance.
- The energy hedges, when excluded, would have resulted in a positive return of 5.8% for the quarter.
- The company is slightly more net long, focusing on activist efforts with a net long exposure of 7% after adjusting for energy hedges.
Misses
- Net sales and other revenues in the Automotive segment decreased by $73 million compared to Q1 2023.
- Real Estate segment's adjusted EBITDA decreased by $2 million due to reduced sales of single-family homes.
- Food Packaging (NYSE:PKG)'s adjusted EBITDA decreased by $4 million due to lower volumes and softening demand.
Q&A Highlights
- CEO Andrew Teno discussed potential strategic options for CVI, emphasizing their role as long-term investors and dealmakers.
- The company is looking at opportunities to enhance the auto service business, including product sourcing, gross margin improvement, and store optimization.
- Teno highlighted that activism opportunities are always present regardless of the macroeconomic environment.
- Teno also stated that while the company's investment strategy includes hedging, there are no plans for significant changes to the hedge levels.
In summary, Icahn Enterprises LP is navigating through a challenging market environment with a strategic focus on activism and cost rationalization across its segments. Despite a net loss, the company's improved EBITDA and net asset value suggest resilience and potential for future growth. The firm continues to evaluate opportunities for accretive transactions and remains committed to enhancing shareholder value.
InvestingPro Insights
Icahn Enterprises LP (IEP) has displayed a mixed financial landscape in the first quarter of 2024, with an improved net loss position and a notable increase in adjusted EBITDA. As investors digest these results, several data points and insights from InvestingPro offer additional context to the company's performance and outlook.
InvestingPro Data metrics reveal that Icahn Enterprises has a market capitalization of $7.79 billion, with a negative Price to Earnings (P/E) ratio of -16.51, reflecting the net loss reported. Despite this, revenue remains substantial at $10.63 billion over the last twelve months as of Q1 2024, although this represents a decline of 16.52% compared to the previous period. The company's dividend yield stands at an impressive 21.55%, showcasing its commitment to returning value to shareholders, as evidenced by its maintained dividend payments for 20 consecutive years.
An InvestingPro Tip highlights that IEP's net income is expected to grow this year, offering a glimmer of optimism for investors looking forward. Another tip indicates that the Relative Strength Index (RSI) suggests the stock is currently in overbought territory, signaling that the stock price may be higher than its intrinsic value based on recent trading volumes.
For readers interested in a deeper dive into IEP's financial health and future prospects, InvestingPro provides additional tips on the company's performance and valuation. There are a total of 9 InvestingPro Tips available for IEP, which can be explored further by visiting https://www.investing.com/pro/IEP. For those looking to take advantage of these insights, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
In summary, while Icahn Enterprises faces challenges, the company's significant dividend yield and the anticipation of net income growth point towards potential recovery and value for shareholders. The detailed metrics and tips from InvestingPro offer investors a more nuanced understanding of the company's financial position and future potential.
Full transcript - Icahn Enterprises (IEP) Q1 2024:
Operator: Good morning, and welcome to the Icahn Enterprises LP's First Quarter 2024 Earnings Conference Call with Andrew Teno, President and Chief Executive Officer; Ted Papapostolou, 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 statements.
Robert Flint: Thank you, operator. The Private Securities Litigation Reform Act of 1995 provides a Safe Harbor for forward-looking statements that 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 expected future business and financial performance of Icahn Enterprise as 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 is 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. Reconciliation of such non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in 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 our attributable to Icahn Enterprises unless otherwise specified. I'll now turn it over to Andrew Teno, our Chief Executive Officer.
Andrew Teno: Thank you Rob. I will provide a brief overview of Q1 results and then we will be available for questions. First quarter net loss was $38 million, an improvement of $232 million over Q1 of 2023. First quarter adjusted EBITDA was $134 million, an increase of $39 million compared to Q1, 2023. Indicative net asset value ended the quarter at approximately $5 billion, up $194 million from the prior quarter. In terms of our controlled businesses, CVI has benefited from lower rent expense offset by wider than usual refined product basis. We believe there are opportunities swirling in the refining space and we'll be disciplined to see if we can find something accretive and attractive. The auto service division is working on several key initiatives to drive earnings and cash flow. Ones of particular note include product sourcing and inventory reduction. Regarding our automotive owned real estate, we are making solid strides with our transformation plans. We have added key personnel to the team to further optimize the real estate portfolio and the auto service business through leasing, greenfields, store optimizations and out-parcel development. This quarter the investment funds had a negative return of 0.8%, primarily driven by energy sector and broad market shorts. If you were to subtract out the impact of our energy shorts, which offset our refining exposure, our returns would have been a positive 5.8% for the quarter. One particular contributor to performance with Southwest Gas Holdings, which increased in value through increased utility profitability and the impact of the recently completed Century IPO. We believe that Century and another one of our long positions AP [ph] are beneficiaries of the need for investment in the grid and additional generation to support growing AI related data center demand. Our headline net short exposure of 27% is a net long exposure of 7% when you adjust for the energy hedges. This compares to net short exposure of 6% as of year end excluding the energy hedges. As you can see, we continue our recent trend of getting slightly more net long and focusing on our activist efforts. Additionally, the Board approved a $1 quarterly distribution per depository unit, which is consistent with last quarter. With that, let me turn it over to Ted for a detailed discussion of all of our segments.
Ted Papapostolou: Thank you, Andrew. I will begin by reviewing the performance of our segments and comment on the strength of our balance sheet. Turning to our investments segment. The funds had a negative return of 0.8% for the quarter. Long and other positions had a positive performance attribution of 12.6%, while short positions had a negative performance attribution of 13.4%. The holding company's interest in the funds was approximately $3.2 billion as of quarter end. And now turning to our energy segment. Energy segment's EBITDA was $118 million for Q1 2024 compared to $229 million for Q1 2023. Q1 2024 refining margin per throughput barrel was $16.29 compared to $23.24 in the prior year quarter. This decrease is primarily driven by lower crack spreads offset in part by reduced RFS expenses and favorable rent revaluation. Q1 2024 average realized gas prices for UAN decreased by 42% to $267 per ton and ammonia decreased by 41% to $528 per ton when compared to the prior year quarter. CVI declared a first quarter cash dividend of $0.50 per share. And now turning to our Automotive segment. Net sales and other revenues decreased by $73 million compared to Q1 '23, primarily driven by the deconsolidation of Auto Plus during the prior year quarter as well as reduced car count for the Automotive service business. Adjusted EBITDA improved $2 million for Q1 2024 compared to Q1 2023. Automotive service was able to maintain adjusted EBITDA through cost cutting and margin initiatives, which offset reduced car count. And turning to our Real Estate segment. Q1 2024 net sales and other revenues decreased by $5 million and adjusted EBITDA decreased by $2 million compared to the prior year quarter, primarily driven by reduced sales of single-family homes. And turning to our other operating segments. Food Packaging's adjusted EBITDA decreased by $4 million for Q1 2024 as compared to the prior year quarter, driven by lower volumes due to softening demand. Home Fashion's adjusted EBITDA increased by $1 million as compared to the prior year quarter, mainly due to margin improvement offset by lower sales. The Pharma segment's adjusted EBITDA for Q1 2024 improved by $5 million as compared to the prior year quarter, mainly due to higher sales and lower operating expenses. And 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 investments in the funds of $4.9 billion and our subsidiaries had cash and revolver availability of $1.1 billion. In summary, we continue to focus on building asset value and maintaining liquidity and to enable us to capitalize on opportunities within and outside our existing operating segments. Thank you. Operator, can you please open the call up for questions?
Operator: Thank you. [Operator Instructions] Our first question comes from the line of Dan Fannon with Jefferies. Your line is now open.
Dan Fannon: Thanks. Good morning. Andrew, I wanted to follow up on your comments around CVI. I think you said something about looking for strategic -- something around accretion. I know that the -- on their call they've talked about looking or exploring strategic options. So I was hoping you could maybe expand a bit upon that and maybe the rationale behind kind of the timing and why now?
Andrew Teno: Hey, Dan. Good morning. So in terms of CVI and in general, over -- we're long-term investors. We're also dealmakers. And so we like to look at basically anything that presents itself. And so over the years, we've looked at a wide variety of things. We felt comfortable mentioning it today, mainly because we put out the 8-K a couple of weeks ago that from both CVI and UAN. And so when we look at our asset base, we think we are -- the CVI team are very good low-cost operators. We think they're very good at running our refining business. And if we can find something interesting, then you would expect us to execute on it.
Dan Fannon: So that would -- sorry, that would be more from the context of adding to your -- through M&A or strategic capital deployment versus exiting any of the existing businesses?
Andrew Teno: I'd just say we look at all opportunities, whatever is available.
Dan Fannon: Understood. And then just moving to the Auto segment. If we look at the path forward and the road map you've laid out, it seems like cost cutting and cost rationalization is still very much in focus. Is that really the playbook for 2024? And then sales recovery from there? Or should we -- are you thinking about -- or is the game plan or the outlook for sales to start to improve here more immediately in this kind of next couple of quarters?
Andrew Teno: Yeah. So I think if you were to look at just in the market in general in this space, I'd say demand is not spectacular, but -- and that's kind of a short-term phenomenon, we hope. But when we look at the long-term opportunity for our auto service business, we think we have opportunities on all fronts. I think David, has now been there as the permanent CEO for a few months, and we think kind of the opportunities are really endless. If we talk about product sourcing, for an example, we think the company really probably could have done a better job in the past, right? So when we look at all of our different product categories, if we're more strategic about how we're buying, if we're more strategic about how we're pricing, then we think there are opportunities to drive higher gross margins on products. We think there are opportunities to improve the service level in the stores. We think there are opportunities to expand the greenfield program. We think there are opportunities to help in relocating stores. And so I think really the opportunities are all of above.
Dan Fannon: Great. That's helpful. And then I guess just at a high level as you think about the environment from a macro perspective and what you're seeing in terms of the activist investment style in this environment given higher rates higher for longer. Are there more areas that you're seeing opportunity? And then maybe you were a year ago go or is it the opposite where the economic backdrop is still quite strong and you're not maybe seeing the valuations and or kind of the incremental opportunity that that you've seen previously? Just trying to get a sense of today versus maybe a year ago and that investment opportunity set.
Andrew Teno: So I had been in Icahn for four years and I can say that pretty much there's always an opportunity for activism. Companies are always getting in trouble. Stock prices are always falling. Hidden gems can always be unlocked. And so on any given quarter we're going through I'm going to guess at least 10 different names where we think there's something. And we usually don't act, but we keep looking to find the right opportunity. I think last quarter we found two names which eventually became public. We may or may not have made more investments since then, but nothing that is not publicly disclosed much.
Dan Fannon: Understood. And then just lastly, appreciated incremental disclosures around the hedging in the investment side and the progress that you've made. Is this -- what do you envision as a steady state when you think about the hedges and no long exposure? Obviously, not trying to predict what you're going to do. But just generally as a philosophy there. Are you where you want to be? Or do you think that there's more change in the context of the portfolio over the next couple of quarters?
Andrew Teno: Yes. So I don't think we really want to bet on where the market is going. I think we've been pretty clear. We want to stay away from that. There probably not any large-scale changes as to what we're going to do in terms of taking down our short exposure. I think call we'd always like to be appropriately hedged. And I think based on how we feel and how we feel that our investments that appropriate hedge could go down a little bit. But it's hard to take it off at these levels. So it's something we evaluate all the time, but I don't really foresee any material changes.
Dan Fannon: Understood. Thanks for taking my question.
Operator: Thank you. I'm currently showing no further questions at this time. I'd like to hand the conference back over to Andrew Teno for closing remarks.
Andrew Teno: Thank you. So, I'd like to leave today with a reminder that here at Icahn Enterprises, we are intensely focused on our activism strategy. We have unique advantages including the Icahn brand name in 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, the two most simply do not possess. No returns can be lumpy and satisfying at times as we continue to focus on our activity efforts at both our investment segment and controlled businesses we believe they will bear fruit for all of our unit holders. We'll speak to everyone soon. Bye.
Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone have a wonderful day.
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