Shares of CVR Energy, Inc. CVI experienced a gain of almost 4% since Icahn Enterprises (IEP), an investment firm controlled by billionaire investor Icahn, proposed to increase its stake in CVR Energy from its current 66% to around 81% on Nov. 8, 2024.

An Insight Into the Recent CVI Announcement

In its third-quarter earnings statement, reported on Nov. 8, IEP announced a 50% reduction in its dividend payout — from $1 per unit in Q2 to 50 cents in Q3 — to use the freed funds to increase its holding in CVI. The IEP plans to complete this procedure by purchasing up to 15 million additional shares for $17.50 per share, a 5.9% premium to Thursday’s close.

This decision came as a move to capitalize on the undervalued stock. IEP believes that the CVI stock has untapped potential despite recent challenges and that the shareholders could benefit from the premium cash-out.

CVI’s Struggles

Recently, CVI experienced instability and a significant decline in its stock price due to the suspension of its dividend payout for the third quarter. The move to suspend the dividend led to shareholders losing their confidence in the company and was viewed as a major setback by market analysts, but IEP considered it an investment opportunity, where it could increase its control over the company and decide its future strategies.

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IEP’s Market Strategy Amid Legal Challenges

Recently, a short seller’s report challenged IEP’s valuation and dividend sustainability. Icahn, the holder of most of IEP’s shares, later dismissed the report as misleading, rebuilding shareholders' confidence in IEP’s financial standing.

Last year, Icahn Enterprises also faced some Securities and Exchange Commission charges over loan disclosure issues and, as a result, had to pay millions of dollars as a penalty. However, Icahn has continued to pursue bold investments in the market, including a major investment in Caesars Entertainment and a cooperation agreement with Southwest Gas.

CVI’s Zacks Rank and Key Picks

Headquartered in Sugar Land, TX, CVR Energy is an independent refiner and marketer of high-value transportation fuels. Currently, CVI has a Zacks Rank #5 (Strong Sell).

Investors interested in the energy sector might look at some better-ranked stocks like Archrock, Inc. AROC, Kosmos Energy Ltd. KOS and Flotek Industries, Inc. FTK.While Archrock currently sports a Zacks Rank #1 (Strong Buy), Kosmos Energy and Flotek Industries each carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Archrock is a provider of natural gas contract compression services and a supplier of aftermarket services of compression equipment. The Zacks Consensus Estimate for AROC’s 2024 earnings indicates 59.42% year-over-year growth.

Hamilton-based Kosmos Energy Ltd. operates as an oil and gas exploration and production company focused on underexplored regions in Africa. KOS’ expected EPS (earnings per share) growth rate for the next 5 years is 17.50%, which aligns favorably with the similar industry growth rate.

Flotek Industries develops and delivers prescriptive chemistry-based technology, including specialty chemicals, to clients in the energy, consumer industrials and food & beverage industries. The Zacks Consensus Estimate for FTK’s 2024 earnings indicates 125% year-over-year growth.

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CVR Energy Inc. (CVI) : Free Stock Analysis Report

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