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Holding company and industrial conglomerate Icahn (NYSE:IEP) announced better-than-expected results in Q2 CY2024, with revenue flat year on year at $2.55 billion. It made a GAAP loss of $0.72 per share, improving from its loss of $0.72 per share in the same quarter last year.
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Icahn Enterprises (IEP) Q2 CY2024 Highlights:
- Revenue: $2.55 billion vs analyst estimates of $2.24 billion (13.9% beat)
- EPS: -$0.72 vs analyst estimates of $0.19 (-$0.91 miss)
- Gross Margin (GAAP): 13.7%, up from 2.6% in the same quarter last year
- EBITDA Margin: -6.1%, down from -1.5% in the same quarter last year
- Market Capitalization: $7.55 billion
General Industrial MachineryAutomation that increases efficiency and connected equipment that collects analyzable data have been trending, creating new demand for general industrial machinery companies. Those who innovate and create digitized solutions can spur sales and speed up replacement cycles, but all general industrial machinery companies are still at the whim of economic cycles. Consumer spending and interest rates, for example, can greatly impact the industrial production that drives demand for these companies’ offerings.
Sales GrowthA company’s long-term performance can indicate its business quality. Any business can put up a good quarter or two, but many enduring ones tend to grow for years. Regrettably, Icahn Enterprises's sales grew at a weak 2.4% compounded annual growth rate over the last five years. This shows it failed to expand in any major way and is a rough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within industrials, a half-decade historical view may miss cycles, industry trends, or a company capitalizing on catalysts such as a new contract win or a successful product line. Icahn Enterprises's history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 8.1% annually.
This quarter, Icahn Enterprises's $2.55 billion of revenue was flat year on year but beat Wall Street's estimates by 13.9%. Looking ahead, Wall Street expects revenue to decline 14.1% over the next 12 months, a deceleration from this quarter.
Operating Margin Although Icahn Enterprises was profitable this quarter from an operational perspective, it's generally struggled over a longer time period. Its expensive cost structure has contributed to an average operating margin of negative 2.3% over the last five years. Unprofitable industrials companies require extra attention because they could get caught swimming naked when the tide goes out. It's hard to trust that Icahn Enterprises can endure a full cycle.
On the bright side, Icahn Enterprises's annual operating margin rose by 25.2 percentage points over the last five years. Still, it will take much more for the company to show consistent profitability.
In Q2, Icahn Enterprises generated an operating profit margin of 6.5%, up 12.4 percentage points year on year. This increase was solid, and since the company's operating margin rose more than its gross margin, we can infer it was recently more efficient with expenses such as sales, marketing, R&D, and administrative overhead.
EPSAnalyzing long-term revenue trends tells us about a company's historical growth, but the long-term change in its earnings per share (EPS) points to the profitability of that growth–for example, a company could inflate its sales through excessive spending on advertising and promotions.
Sadly for Icahn Enterprises, its EPS declined by 18.4% annually over the last five years while its revenue grew by 2.4%. However, its operating margin actually expanded during this timeframe, telling us non-fundamental factors affected its ultimate earnings.
Diving into the nuances of Icahn Enterprises's earnings can give us a better understanding of its performance. A five-year view shows Icahn Enterprises has diluted its shareholders, growing its share count by 130%. This dilution overshadowed its increased operating efficiency and has led to lower per share earnings. Taxes and interest expenses can also affect EPS but don't tell us as much about a company's fundamentals.
Like with revenue, we also analyze EPS over a shorter period to see if we are missing a change in the business. For Icahn Enterprises, its two-year annual EPS growth of 15.3% was higher than its five-year trend. This acceleration made it one of the faster-growing industrials companies in recent history.
In Q2, Icahn Enterprises reported EPS at negative $0.72, in line with the same quarter last year. This print missed analysts' estimates. Over the next 12 months, Wall Street is optimistic. Analysts are projecting Icahn Enterprises's EPS of negative $1.16 in the last year to flip to positive $0.89.
Key Takeaways from Icahn Enterprises's Q2 ResultsWe were impressed by how significantly Icahn Enterprises blew past analysts' revenue expectations this quarter. On the other hand, its EPS missed. Overall, this quarter could have been better. The stock traded down 1.3% to $16.50 immediately after reporting.
