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Brookfield Business Shares Fell After Q1 Results Reflecting CDK, Sagen Pressures, RBC Says

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Brookfield Business' (BBUC) shares fell after Q1 results, mainly due to concerns around CDK Global experiencing challenges and Sagen seeing an increase in its loss ratio, RBC Dominion Securities said in a note Monday.

"CDK has not been immune to AI/software-related challenges, with the company's first lien notes trading at distressed levels," the analysts said, adding that Brookfield Business is focused on recovering its investment, and CDK is estimated to represent less than 10% of the company's net asset value, or NAV. The 8% post-earnings drop in Brookfield Business shares partially reflects market concerns that CDK equity may be worth nothing, the analysts added.

The analysts said Sagen's higher loss ratio, which represents about 15% of Brookfield Business' NAV, is "manageable." Its Q1 loss ratio rose to 12% from 5% in 2025 and above the prior four-year average of 5%, with Sagen expecting it to remain around 12% in 2026.

The analysts said that they believe Brookfield Business' track record of investment performance, driven by a differentiated strategy and capital deployment over the past several years in a favorable investment environment, could support strong NAV growth going forward.

RBC lowered its price target on Brookfield Business to $40 from $44 and reiterated its outperform rating.

Price: $31.18, Change: $+0.32, Percent Change: +1.05%

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