Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

We are upgrading Berkshire Hathaway Inc. (BRK.A - Snapshot Report)(BRK.B - Analyst Report) to Outperform from Neutral following its second-quarter earnings outperformance. The quarter reflected strong performances across all the business segments – Insurance, Railroad, Utilities and Energy, Manufacturing, Service and retailing as well as Finance and Financial products.

Berkshire has grown over decades by making numerous acquisitions and at present holds over 80 operating subsidiaries under it. These subsidiaries are operated as independent entities with respective managers responsible for operating decisions.

Berkshire’s property and casualty insurance business has been the key driver of growth. Its insurance and reinsurance businesses, such as Geico, have been positively contributing to the company's profits since a long time. Its insurance units generate strong "float", which is invested by the Chairman and CEO Warren Buffet. Float represents funds that are held by an insurance business during the period when policyholders submit payment and funds are eventually paid out to settle claims. The insurance business maintains capital strength at exceptionally high levels. This strength differentiates Berkshire’s insurance companies from their competitors – Assurant Inc. (AIZ - Analyst Report) and Reinsurance Group of America Inc. (RGA - Analyst Report).

Berkshire’s economically sensitive non-insurance businesses – utilities & energy, and manufacturing, service & retail – are also performing strongly after suffering under the weak economy in 2009. The utilities and energy business is witnessing strong growth with increased revenues from BNSF, the railway which was acquired in February 2010. The segment accounted for more than 50% of the second-quarter profits.

Although some units are dragged down by a weak economy, overall the company is performing impressively.

However, Buffett’s succession is the biggest matter of concern for the shareholders. He is already 82 years old and has been suffering medical complications. Though he announced that a competent successor has been chosen, the identity remains undisclosed. Nevertheless, there is an air of uncertainty about the performance of the company under the new CEO.  In our view, it would be a very difficult job for any new management to be able to make the company perform like it did under Buffett and Munger.

The stock retains a Zacks #2 Rank, which translates into a short-term Buy rating.

 

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GRP IN DXYN 15.84 +7.90%
BOFI HLDG IN BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%