Icahn Enterprises: 25% Yield Maintained, But For How Long?

Core Insights - Icahn Enterprises L.P. (NASDAQ: IEP) has received two Sell ratings, with stock performance aligning with expectations, showing a price at publication of $19.9 and a total return of -9.68% [2][3] - The company declared a $1 distribution, maintaining an annualized yield close to 25%, but challenges in underlying segments suggest a potential need to eliminate distributions altogether [4][17] Financial Performance - For Q2 2024, IEP reported a net loss of $331 million, or $0.72 per depositary unit, consistent with the previous year's loss of $269 million [5][6] - Adjusted EBITDA for Q2 2024 was a loss of $155 million, a significant decline from a gain of $14 million in Q2 2023 [5][6] - The indicative net asset value (NAV) as of June 30, 2024, was approximately $4 billion, down $969 million from March 31, 2024, and $775 million from December 31, 2023 [6][12] Segment Analysis - Investment Segment: Total return was negative 8.1% for the quarter, heavily impacted by Bausch Health Companies Inc. (BHC), which saw a 50% decline since March 31, 2024 [6][7] - Energy Segment: CVR Energy's adjusted EBITDA decreased by $127 million to $46 million compared to $173 million in the prior year, with realized gate prices for UAN down 15% [8] - Automotive Segment: Net sales decreased by $42 million due to reduced consumer spending on automotive repairs, although adjusted EBITDA improved slightly by $2 million [10] - Other Segments: Adjusted EBITDA for real estate and food packaging segments decreased due to lower demand, with overall revenues declining year over year [11] Unit Count and NAV - The weighted average count of units for Q2 2024 was 450 million, up from 367 million the previous year, with actual units outstanding at 475.5 million as of June 30, 2024 [14][15] - The NAV per unit is approximately $8.37, which is about 25% lower than the previous quarter and 45% lower than five quarters ago [16][17] Outlook - The total NAV has dropped significantly, raising concerns about the company's ability to manage net debt effectively [12][17] - The sustainability of the current distribution is questioned, with expectations that it may need to be reduced or eliminated soon [18][19]