Why Shares of Icahn Enterprises Are Up Today

Why Shares of Icahn Enterprises Are Up Today

Icahn Enterprises (NASDAQ:IEP) reported its first-quarter results before the opening bell Wednesday, narrowing its net losses year-over-year and maintaining its eye-watering dividend at its previous level. Investors reacted positively to the news, sending shares of the holding company up as much as 5% in morning trading. At 12:06 p.m., they fell slightly, but remained up 4.1%.

Better results, stable dividend

Icahn Enterprises is the investment vehicle of the legendary activist investor Carl Icahn, but the company itself has been a target of activists in recent years. In 2023, Hindenburg Research released a report calling Icahn Enterprises “significantly overvalued” and claiming that it used a “Ponzi-like” structure to fund its dividend.

The report resonated with investors, who punished the stock. It remains down about 67% from where it traded at the start of 2023, and Icahn Enterprises earlier this year named portfolio manager Andrew Teno as its new CEO. But the company continues to conduct business as usual despite the controls.

Icahn Enterprises reported a first-quarter net loss of $38 million, a year-over-year improvement of $232 million. First-quarter adjusted EBITDA was $134 million, up from $95 million a year earlier. These improvements were driven by lower losses in the company’s investment portfolio and automotive segments, which were partially offset by a slowdown in its energy unit.

Just as importantly, Icahn Enterprises declared a quarterly dividend of $1 per share, in line with its previous payout. The company cut its dividend by 50% last year, but kept it steady in subsequent quarters.

Is Icahn Enterprises Stock a Buy?

The company owns a strange assortment of assets in the energy, auto, food, real estate and pharmaceutical sectors, and even without activist scrutiny, it is unlikely that it attracts many investors. But at the current share price, its dividend yields 22%, implying that either the stock is undervalued or the payout is unsustainable.

We know Hindenburg Research’s answer to this question. We also heard Icahn Enterprises insist that the activist was irrelevant. Investors tempted to buy and capitalize on this dividend should keep a close eye on Icahn Enterprises and not invest too much in it.

Should you invest $1,000 in Icahn Enterprises right now?

Before buying Icahn Enterprises stock, consider this:

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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the securities mentioned. The Mad Motley has a disclosure policy.

Why Icahn Enterprises Stock is Up Today was originally published by The Motley Fool

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