Yahoo Finance Zacks Initiates Coverage of Steel Partners With Neutral Recommendation
Zacks Investment Research has recently initiated the coverage of Steel Partners Holdings L.P. SPLP with a “Neutral” recommendation. The comprehensive research report highlights the company's robust revenue growth, diversified business model and strategic acquisitions, balanced against challenges in key segments and margin pressures.
Founded in 2008 and headquartered in New York, Steel Partners operates across four primary segments — Diversified Industrial, Energy, Financial Services and Supply Chain. Each segment contributes distinct value, with the Diversified Industrial segment contributing 62.7% to the total revenues in 2023. The company’s comprehensive portfolio spans from engineered niche industrial products and energy services to banking and global supply-chain solutions.
Steel Partners reported a 7% year-over-year increase in revenues for the first quarter of 2024, totaling $476.3 million. This growth was driven by a consolidation in its supply-chain operations and an impressive 18.5% increase in revenues from its Financial Services segment. The inclusion of Steel Connect has also contributed to mitigating risks and bolstering growth. As of Mar 31, 2024, SPLP had a strong cash position of $273.9 million and it significantly reduced debt to $92.8 million. Furthermore, the company reduced its interest expenses by 76.7% in the first quarter.
The research report highlights several key factors that could drive Steel Partners' growth. SPLP's diversified revenue streams and strategic acquisitions provide stability and growth potential. The company's solid balance sheet, with substantial liquidity and reduced debt levels, further enhances its financial standing.
SPLP's active share repurchase program and consistent quarterly distributions also signal management's confidence in its prospects and commitment to returning value to shareholders. Additionally, the consistent quarterly cash distribution of 37.5 cents per unit on its 6% Series A Preferred Units reflects a commitment to returning value to shareholders.
However, potential investors should be aware of the challenges highlighted in the report. The adjusted EBITDA margin declined year over year from 14.2% to 12.3% mainly due to the underperformance in the Energy and Diversified Industrial segments. The Energy segment experienced a notable 33.7% drop in revenues, whereas the Diversified Industrial segment saw a 3.9% decrease in sales, impacting overall profitability. Additionally, geopolitical tensions have contributed to fluctuations in operational costs and investor confidence.
On the downside, the lower adjusted EBITDA margin and decreased profitability in key segments highlight ongoing challenges. The volatility in cash flow and reliance on market-driven gains introduce uncertainties that could impact investor confidence. Additionally, volatile commodity prices and a limited trading float pose significant risks.
Shares of Steel Partners have significantly underperformed the Zacks multi-sector conglomerates subindustry, the Zacks diversified operations sector and the broader S&P 500 index over the past six and 12 months. Despite this underperformance, the stock is trading at significantly lower multiples on an EV/Sales and EV/EBITDA basis compared to its peers and the broader market, reflecting its discounted valuation.
For a comprehensive analysis of SPLP's financial health, strategic initiatives and market positioning, you are encouraged to view the full Zacks research report. This detailed report explores the company's operational strategies and financial performance, highlighting potential risks and opportunities that may impact its direction.
Read the full Research Report on Steel Partners here>>>
Note: Our initiation of the coverage on Steel Partners, which has a modest market capitalization of $744 million, aims to equip investors with the information needed to make informed decisions in this promising but inherently risky segment of the market.
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Steel Partners Holdings LP (SPLP): Free Stock Analysis Report
