Shares of Canadian energy explorer Talisman Energy Inc. rose in after-hours trading, following an announcement by billionaire investor Carl Icahn that he holds 61.6 million shares of the company.
Carl Icahn has spent $277 million in building his 5.97% stake in Talisman Energy, with purchases beginning on Sep 25. He stated that the move was an activist stance and bought the shares as they were undervalued. His intentions are to enter into discussions with management on strategic initiatives and gain a seat on the board.
Icahn has climbed onto a company which has persistently given poor stock performance. Shares of the company has been almost flat for a prolonged period. Further, Talisman Energy missed the Zacks Consensus Estimate by an enormous 175% percent as it reported a second quarter loss of 3 cents. Prior quarters had been disappointing as well.
However, the company’s financial flexibility and strong balance sheet are real assets. At the end of the second quarter, the company has a cash balance of approximately $270 million. Moreover, management’s decision to divest non-core assets is also a positive move.
Mr. Icahn’s investment decision can be anticipated as a move to take advantage of the gains from the company’s restructuring plans. With assets spread across several prospective locations, Talisman may have unlocked potential. Our belief in the company is reflected in its long-term expected earnings growth of 19.95%.
Talisman Energy stock trades in a 52-week range of $10.34 to $13.43. The share settled at $12.75 on Oct 7, up 4.5% over the previous close. Moreover, post-announcement, shares increased 6.9% to $13.63 in the extended hours.
Talisman Energy currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, there are other companies in the energy sector expected to perform better in the short term. These include Zacks Rank #1 (Strong Buy) Dril-Quip, Inc. (DRQ - Free Report) , Stone Energy Corp. and Kinder Morgan, Inc. (KMI - Free Report) .