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Understanding Icahn Enterprises’ Operations

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Overview of Icahn’s ten operating segments

Icahn Enterprises (IEP) enters into businesses that have good growth potential. It develops these businesses or portfolios with the help of its management teams.

IEP’s segments invest in businesses that they believe to be undervalued. IEP has the strong financial muscle to park its permanent capital for long-term horizons.

The diagram above shows the sectors that IEP has exposure to, excluding its investments.

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Energy and automotive contributed the most to revenue

The energy and automotive (FDML) segments contribute a total of ~83% to IEP’s revenue. In 2015, the energy segment contributed 34% to IEP’s total revenue, while the automotive segment contributed 49%.

Double-digit year-over-year (or YoY) growth was seen in IEP’s real estate, railcar, and home fashion segments. The real estate segment’s revenue rose 30%, from $101 million in 2014 to $131 million in 2015. This robust rise in the segment’s revenue was on account of its sale of 14 commercial rental properties.

The railcar segment’s (ARII) revenue rose 19%, from $790 million in 2014 to $939 million in 2015. This was on account of growth in its fleet leasing. The segment’s fleet grew 13% to approximately 45,000 railcars in 2015, compared to 40,000 at the end of 2014.

The home fashion segment’s revenue rose 10%, from $176 million in 2014 to $193 million in 2015. The rise can be attributed to higher sales volumes.

Oil and gas, industrials affected the metals segment

The metals segment, which includes PSC Metals and CVR Energy (CVI), showed a double-digit YoY fall. The segment’s revenue fell 49%, from $711 million in 2014 to $361 million in 2015. Its lower revenue was due to slumps in the oil and gas (XOP) and industrials (XLI) sectors.

The steep fall in IEP’s metals segment sales was on account of lower sales volumes and selling prices. In the energy segment, sales fell 41% in 2015.

From April 2015 to April 2016, IEP fell ~33% compared to the SPDR S&P 500 ETF (SPY), which fell 1%. In the same period, Icahn’s peers Leucadia (LUK) and Loews (L) fell 26% and 7%, respectively, and Berkshire Hathaway (BRKB) rose 3.4%.

Now it’s time to examine Icahn’s investment segment.

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