Wednesday, March 6, 2024

The Zacks Research Daily presents the best research output of our analyst team. Today's Research Daily features new research reports on 16 major stocks, including Berkshire Hathaway Inc. (BRK.B), Linde plc (LIN) and Union Pacific Corp. (UNP). These research reports have been hand-picked from the roughly 70 reports published by our analyst team today.

Berkshire Hathaway’s shares have outperformed the Zacks Insurance - Property and Casualty industry over the past year (+26.4% vs. +23.7%). The company is one of the largest property and casualty insurance companies with numerous diverse business activities. A strong cash position supports earnings-accretive bolt-on buyouts and is indicative of its financial flexibility.

Continued insurance business growth fuels increase in float, drive earnings and generates maximum return on equity. The non-insurance businesses have also been doing well in the last few years. The addition of Pilot Travel Centers (PTC) has strengthened its energy business. A sturdy capital level provides further impetus.

However, exposure to catastrophic ("cat") losses induces earnings volatility and also affects the underwriting results. Huge capital expenditures remain a headwind. With the demise of Charles Munger, uncertainty looms over the company's performance.

(You can read the full research report on Berkshire Hathaway here >>>)

Shares of Linde have outperformed the Zacks Chemical - Specialty industry over the past year (+30.5% vs. +23.6%). The company has an extensive range of industrial gas applications that is enhancing global productivity day by day. The company’s primary products in industrial gases include oxygen, which is used as life support in hospitals.

Linde has long-term contracts with on-site customers, backed by minimum purchase requirements, thereby securing stable cashflows. In the profitable industrial gas market, the merger of Praxair and Linde has created an efficient player with a considerable size advantage. However, increasing competition for new projects in emerging markets is concerning.

The company faces vulnerability due to economic growth slowdowns, potentially impacting industrial gas demand. Linde's history of consistently offering lower dividend yields compared with the composite stocks belonging to the sector has been a concern for income-oriented investors. As such, the stock warrants a cautious stance.

(You can read the full research report on Linde here >>>)

Union Pacific’s shares have outperformed the Zacks Transportation - Rail industry over the past year (+24.3% vs. +20.8%). The company’s efforts to reward its shareholders, even in the current uncertain scenario, are encouraging. In 2023, UNP bought back shares worth $700 million. The railroad operator paid dividends worth $3.2 billion in 2023.

Union Pacific's strong free cash flow generating ability supports its shareholder-friendly activities. On the flip side, a decline in volumes due to soft consumer markets and reduced fuel surcharge revenues is a concern.

Given the soft freight market scenario, the revenue weakness is likely to persist going forward as well. This will hurt overall volumes. Operating ratio (operating expenses as a percentage of revenues) deteriorated 220 basis points in 2023 from the 2022 reading, mainly due to revenue weakness. Capital expenditures are expected to be $3.4 billion in 2024.

(You can read the full research report on Union Pacific here >>>)

Other noteworthy reports we are featuring today include Prologis, Inc. (PLD), The Allstate Corp. (ALL) and Exelon Corp. (EXC).

Mark Vickery
Senior Editor

Note: Sheraz Mian heads the Zacks Equity Research department and is a well-regarded expert of aggregate earnings. He is frequently quoted in the print and electronic media and publishes the weekly Earnings Trends and Earnings Preview reports. If you want an email notification each time Sheraz publishes a new article, please click here>>>