Icahn Enterprises (IEP)

Holding company and industrial conglomerate Icahn (NYSE:IEP) announced better-than-expected revenue in Q3 CY2025, but sales fell by 2% year on year to $2.73 billion. Its GAAP profit of $0.49 per share was significantly above analysts’ consensus estimates.

Company Overview

Founded in 1987, Icahn Enterprises (NASDAQ: IEP) is a diversified holding company primarily engaged in investment and asset management across various sectors.

Automation 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.

Competitors offering similar products include Berkshire Hathaway (NYSE:BRK.A), Brookfield Asset Management (NYSE:BN), and KKR (NYSE:KKR).

Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Luckily, Icahn Enterprises’s sales grew at a solid 9.5% compounded annual growth rate over the last five years. Its growth beat the average industrials company and shows its offerings resonate with customers.

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 recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 8.5% over the last two years.

This quarter, Icahn Enterprises’s revenue fell by 2% year on year to $2.73 billion but beat Wall Street’s estimates by 13.4%.

Looking ahead, sell-side analysts expect revenue to decline by 4.1% over the next 12 months. Although this projection is better than its two-year trend, it’s hard to get excited about a company that is struggling with demand.

Icahn Enterprises has bad unit economics for an industrials business, signaling it operates in a competitive market. As you can see below, it averaged a 11.9% gross margin over the last five years. Said differently, Icahn Enterprises had to pay a chunky $88.11 to its suppliers for every $100 in revenue.

Icahn Enterprises’s gross profit margin came in at 38.2% this quarter, marking a 23.6 percentage point increase from 14.5% in the same quarter last year. Icahn Enterprises’s full-year margin has also been trending up over the past 12 months, increasing by 3.5 percentage points. If this move continues, it could suggest better unit economics due to some combination of stable to improving pricing power and input costs (such as raw materials).

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Icahn Enterprises was profitable over the last five years but held back by its large cost base. Its average operating margin of 2.9% was weak for an industrials business. This result isn’t too surprising given its low gross margin as a starting point.

Analyzing the trend in its profitability, Icahn Enterprises’s operating margin decreased by 10.9 percentage points over the last five years. This raises questions about the company’s expense base because its revenue growth should have given it leverage on its fixed costs, resulting in better economies of scale and profitability. Icahn Enterprises’s performance was poor no matter how you look at it - it shows that costs were rising and it couldn’t pass them onto its customers.

This quarter, Icahn Enterprises generated an operating margin profit margin of 30.2%, up 22.9 percentage points year on year. The increase was driven by stronger leverage on its cost of sales (not higher efficiency with its operating expenses), as indicated by its larger rise in gross margin.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Although Icahn Enterprises’s full-year earnings are still negative, it reduced its losses and improved its EPS by 38.3% annually over the last five years. The next few quarters will be critical for assessing its long-term profitability.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

For Icahn Enterprises, its two-year annual EPS growth of 40.3% was higher than its five-year trend. We love it when earnings improve, but a caveat is that its EPS is still in the red.

In Q3, Icahn Enterprises reported EPS of $0.49, up from $0.05 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street is optimistic. Analysts forecast Icahn Enterprises’s full-year EPS of negative $0.79 will flip to positive $0.50.

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.

Icahn Enterprises has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company’s free cash flow margin averaged 6.4% over the last five years, slightly better than the broader industrials sector.

Taking a step back, we can see that Icahn Enterprises’s margin expanded by 19.6 percentage points during that time. This is encouraging, and we can see it became a less capital-intensive business because its free cash flow profitability rose while its operating profitability fell.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Icahn Enterprises historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 3.7%, lower than the typical cost of capital (how much it costs to raise money) for industrials companies.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Unfortunately, Icahn Enterprises’s ROIC has decreased over the last few years. Paired with its already low returns, these declines suggest its profitable growth opportunities are few and far between.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

Icahn Enterprises’s $6.69 billion of debt exceeds the $6.06 billion of cash on its balance sheet. Furthermore, its 10× net-debt-to-EBITDA ratio (based on its EBITDA of $65 million over the last 12 months) shows the company is overleveraged.

At this level of debt, incremental borrowing becomes increasingly expensive and credit agencies could downgrade the company’s rating if profitability falls. Icahn Enterprises could also be backed into a corner if the market turns unexpectedly – a situation we seek to avoid as investors in high-quality companies.

We hope Icahn Enterprises can improve its balance sheet and remain cautious until it increases its profitability or pays down its debt.

It was good to see Icahn Enterprises beat analysts’ EPS expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a solid print. The stock traded up 6% to $8.60 immediately after reporting.

Updated: December 3, 2025 at 10:53 PM EST

When considering an investment in Icahn Enterprises, investors should account for its valuation and business qualities as well as what’s happened in the latest quarter.

Icahn Enterprises’s business quality ultimately falls short of our standards. Although its revenue growth was solid over the last five years, it’s expected to deteriorate over the next 12 months and its diminishing returns show management's prior bets haven't worked out. And while the company’s rising cash profitability gives it more optionality, the downside is its relatively low ROIC suggests management has struggled to find compelling investment opportunities.

Icahn Enterprises’s forward price-to-sales ratio is 0.5x. The market typically values companies like Icahn Enterprises based on their anticipated profits for the next 12 months, but there aren’t enough published estimates to arrive at a reliable number. You should avoid this stock for now - better opportunities lie elsewhere.

Wall Street analysts have a consensus one-year price target of $12 on the company (compared to the current share price of $8.08).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.