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Berkshire (BRK.B) to Report Q4 Earnings: What's in the Cards?

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Berkshire Hathaway Inc. (BRK.B - Free Report) delivered earnings surprise in two of the three reported quarters of 2020. The Zacks Consensus Estimate for the fourth quarter of 2020 is pegged at $2.34 per share, indicating an increase of 29.3% from the year-ago quarter reported figure.

Let’s see how things have shaped up prior to the announcement.

Berkshire Hathaway is the second largest property and casualty insurance company in terms of premium volumes. Its property and casualty insurance business generates maximum return on equity. The fourth quarter is likely to have witnessed catastrophe losses, stemming from hurricanes Delta and Zeta, and the Tropical Storm Eta apart from other windstorms. This is likely to have weighed on underwriting profit and resulted in deterioration of combined ratio.

However, better pricing, and exposure growth may have aided premium revenues. Continued insurance business growth is expected to have increased float.

The railroad business is expected to have been affected by the lower volumes. Average revenue per car/unit is expected to have been lower attributable to COVID-19 pandemic. Nonetheless, lower operating costs are likely to have been a partial offset.

Though economic activities have resumed, lower-than-expected sales are likely to have affected Manufacturing, Service and Retailing segment.

Berkshire Hathaway’s Finance and Financial Products segment units — CORT (furniture) and XTRA (semi-trailers) — are industry leaders. These have been witnessing considerable improvement in earnings with recovery in the soft housing market.

Strategic acquisitions are expected to have aided the company’s performance.

However, expenses are likely to have hampered margin expansion.

What the Zacks Model Says

Our proven model does not conclusively predict an earnings beat for Berkshire Hathaway this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case as you can see below.

Earnings ESP: Berkshire Hathaway has an Earnings ESP of 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $2.34. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Berkshire Hathaway Inc. Price and EPS Surprise

Berkshire Hathaway Inc. Price and EPS Surprise

Berkshire Hathaway Inc. price-eps-surprise | Berkshire Hathaway Inc. Quote

Zacks Rank: Berkshire Hathaway currently carries a Zacks Rank of 3.

Stocks to Consider

Some insurance stocks with the right combination of elements to come up with an earnings beat this time around are:
Saul Centers (BFS - Free Report) has an Earnings ESP of +4.41% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Open Lending Corporation (LPRO - Free Report) has an Earnings ESP of +3.17% and a Zacks Rank #3.

Redfin Corporation (RDFN - Free Report) has an Earnings ESP of +84.62% and a Zacks Rank of 3.

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