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Berkshire (BRK.B) to Report Q2 Earnings: What's in Store?
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Berkshire Hathaway Inc. (BRK.B - Free Report) beat on earnings in three of the last four reported quarters and missed in one, with the average beat being 3.78%. The Zacks Consensus Estimate for the second quarter of 2021 is pegged at $2.52 per share, indicating an increase of 10.5% 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. Premiums are likely to have increased given exposure growth, improved pricing, solid retention. Per Marsh, global commercial insurance prices in the second quarter of 2021 increased 15%. Property rates increased 12%, casualty pricing rose 6%, U.S. financial and professional lines pricing increased 34% while cyber insurance pricing rose 56%.
Continued insurance business growth is expected to have increased float.
A benign catastrophe environment is likely to have aided improvement in underwriting results. Per a report published in ARTEMIS, analysts at RBC Capital Markets project 30-50% below average natural catastrophe losses or between $10 billion and $14 billion for the second quarter of 2021. Also, COVID-19 related losses, which are categorized as catastrophe losses, are estimated to have been much lower from the year-ago level. Combined ratio is thus expected to have improved.
The railroad business is expected to have benefited from increase in freight volumes and lower costs due to improved productivity at railroad as well as increased earnings from the natural gas pipelines and real estate brokerage businesses. Lower earnings from the other energy businesses 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 $2.52. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
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Berkshire (BRK.B) to Report Q2 Earnings: What's in Store?
Berkshire Hathaway Inc. (BRK.B - Free Report) beat on earnings in three of the last four reported quarters and missed in one, with the average beat being 3.78%. The Zacks Consensus Estimate for the second quarter of 2021 is pegged at $2.52 per share, indicating an increase of 10.5% 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. Premiums are likely to have increased given exposure growth, improved pricing, solid retention. Per Marsh, global commercial insurance prices in the second quarter of 2021 increased 15%. Property rates increased 12%, casualty pricing rose 6%, U.S. financial and professional lines pricing increased 34% while cyber insurance pricing rose 56%.
Continued insurance business growth is expected to have increased float.
A benign catastrophe environment is likely to have aided improvement in underwriting results. Per a report published in ARTEMIS, analysts at RBC Capital Markets project 30-50% below average natural catastrophe losses or between $10 billion and $14 billion for the second quarter of 2021. Also, COVID-19 related losses, which are categorized as catastrophe losses, are estimated to have been much lower from the year-ago level. Combined ratio is thus expected to have improved.
The railroad business is expected to have benefited from increase in freight volumes and lower costs due to improved productivity at railroad as well as increased earnings from the natural gas pipelines and real estate brokerage businesses. Lower earnings from the other energy businesses 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 $2.52. 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-eps-surprise | Berkshire Hathaway Inc. Quote
Zacks Rank: Berkshire Hathaway currently carries a Zacks Rank of 2.
Stocks to Consider
Some insurance stocks with the right combination of elements to come up with an earnings beat this time around are:
American International Group (AIG - Free Report) has an Earnings ESP of +8.82% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Allstate Corporation (ALL - Free Report) has an Earnings ESP of +5.34% and a Zacks Rank of 3
Lemonade (LMND - Free Report) has an Earnings ESP of +10.48% and a Zacks Rank of 3.