Brookfield Business Partners' Q1 2025: A Storm of Growth Amid Mixed Winds

Brookfield Business Partners (BBU) has released its Q1 2025 financial results, painting a picture of resilience and ambition but also highlighting lingering challenges. The company reported net income of $80 million, up sharply from $48 million in Q1 2024, while adjusted EBITDA surged to $591 million, a 9% year-over-year increase. Yet beneath these headline figures lie divergent trends across its segments, a complex capital structure, and a stock price under pressure. Let’s dissect the numbers to determine whether BBU is worth a closer look.

The Good: EBITDA Growth and Strategic Moves

The star performer here is adjusted EBITDA, which rose to $591 million, driven by tax benefits at its advanced energy storage division (Clarios) and operational improvements. Excluding acquisitions and divestitures, adjusted EBITDA hit $575 million—a 13.4% jump from $507 million in 2024. This organic growth is a strong signal of operational efficiency.

Brookfield also made bold moves in the quarter, including the announced $1.3 billion acquisition of Antylia Scientific, a life sciences and environmental lab supplier. While Brookfield is only acquiring a 25% stake for $160 million, this marks a strategic pivot into high-growth sectors. The deal, set to close in Q2, underscores the company’s appetite for innovation and diversification.

The Not-So-Good: Segment Volatility and Liquidity Pressures

Not all segments are thriving. Business Services, which includes CDK Global (a software firm) and Sagen (a mortgage insurer), saw adjusted EBITDA rise to $213 million but faced headwinds from CDK Global’s customer churn and tech upgrades. Meanwhile, Infrastructure Services dipped to $104 million from $143 million as the offshore oil services business was sold.

The Industrials segment, however, delivered fireworks. EBITDA rocketed to $304 million—up 33% from $228 million—thanks to Clarios’ tax benefits and soaring demand for energy storage. Yet DexKo, its engineered components division, stumbled to $30 million from $33 million due to weak end-market demand.

Liquidity remains a concern. While Brookfield boasts $2.41 billion in available capital, its proportionate borrowings across segments total $13.7 billion. The company has been deleveraging, reducing corporate debt to $1.017 billion from $2.14 billion, but high leverage ratios could strain under economic stress.

Capital Allocation: Repurchases and Recycling

Brookfield returned $140 million to shareholders in Q1, repurchasing 5.9 million units at an average price of $24. This signals confidence in its valuation—though the stock has underperformed, dropping 6.29% year-to-date.

The company also recycled $1.5 billion in capital, primarily from the sale of its offshore oil services business, which contributed to a $114 million net gain. This discipline in capital management is a plus, but investors must weigh it against the stock’s technical weakness.

Analyst Take: Neutral Amid Contradictions

Analysts rate BBU “Neutral,” torn between strengths and risks. Strengths include record EBITDA growth, strategic acquisitions, and a focus on deleveraging. Risks? High leverage, negative earnings multiples, and bearish momentum. Segment-specific risks like execution delays at CDK Global or a slump in European modular leasing (Modulaire) could further test resilience.

Conclusion: A Compelling Play, But With Caveats

Brookfield Business Partners is a company at crossroads. Its Q1 results highlight undeniable strengths—especially in Industrials and capital recycling—but also vulnerabilities tied to cyclical industries and debt levels. Key data points:
- EBITDA growth: 13.4% organic rise suggests operational prowess.
- Strategic bets: Antylia and Clarios position BBU for long-term growth in tech and energy storage.
- Valuation concerns: A market cap of $1.93 billion vs. an enterprise value of $18.37 billion hints at overvaluation.

Investors should consider BBU a hold for now. The stock’s YTD decline and technical “Hold” rating suggest caution, but the company’s ability to execute on high-growth acquisitions and deleverage could turn the tide. Monitor Q2’s Antylia acquisition close and Clarios’ performance closely—these will be critical tests of BBU’s thesis.

In short: Brookfield is worth watching, but not yet worth betting the farm on.