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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.