Back to top

Image: Bigstock

Berkshire Hathaway B (BRK.B) Up 5.4% Since Last Earnings Report: Can It Continue?

Read MoreHide Full Article

It has been about a month since the last earnings report for Berkshire Hathaway B (BRK.B - Free Report) . Shares have added about 5.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Berkshire Hathaway B due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Berkshire Q4 Earnings Up on Strong Segment Results

Berkshire Hathaway delivered fourth-quarter 2020 operating earnings of $5 billion that increased 13.6% year over year. The increase was driven by lower insurance loss, and higher earnings at railroad, utilities and energy, and other businesses.

Operating earnings at Railroad, Utilities and Energy increased 6.5% year over year to about $2 billion. Manufacturing, Service and Retailing increased 4.8% year over year to about $2.1 billion. However, operating earnings at Insurance and Others declined 57.8% year over year to $971 million.

Full-Year Highlights

For 2020, operating earnings of $21.9 billion decreased 8.6% year over year. Soft performance in Insurance and Others, Railroad, Utilities and Energy as well as Manufacturing, Service and Retailing resulted in the decline.

Revenues decreased 3.6% year over year to $245.5 billion, attributable to lower insurance premiums earned, sales and service revenues, leasing revenue, railroad, utilities and energy revenues, interest, dividend and other investment income.

Costs and expenses increased 2.5% year over year to $231.3 billion, largely due to increase in costs and expenses in Insurance and Other.

Berkshire Hathaway’s Insurance and Other segment revenues increased 2.5% year over year to $69.4 billion in 2020 on the back of higher insurance premiums earned. Pretax earnings were $6.8 billion, down 3.3% year over year. The results suffered due to premium reductions from the GEICO Giveback program, reduced claims frequencies for private passenger automobile insurance and increased loss estimates for certain commercial insurance and property and casualty reinsurance business as well as low rate environment.

Railroad, Utilities and Energy operating revenues declined about 4% year over year to $42.9 billion. Pretax earnings of $9.3 billion were down 6% year over year. The results reflect lower railroad operating revenues from lower shipping volumes, attributable to the negative effects of the COVID-19 pandemic, partly offset by lower operating costs and the effects of productivity improvements and increased tax benefits from renewable energy and increased earnings from the real estate brokerage business.

Total revenues at Manufacturing, Service and Retailing decreased 6% year over year to $134.1 billion. Pretax earnings declined about 12% year over year to $9.3 billion. Impacts of COVID-19 weighed on the results.

Financial Position

As of Dec 31, 2020, consolidated shareholders’ equity was $451.3 billion, up 5.3% from the level as of Dec 31, 2019. At quarter end, cash and cash equivalents were $48 billion, down 25.2% from the level at 2019 end.

The company exited 2020 with a float of about $139 billion, up $9 billion from the figure at year-end 2019.

Cash flow from operating activities totaled $39.8 billion in 2020, up 2.8% from the year-ago period.

The company bought back shares worth $24.7 billion in 2020.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

Currently, Berkshire Hathaway B has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Berkshire Hathaway B has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Berkshire Hathaway Inc. (BRK.B) - free report >>

Published in