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Berkshire (BRK.B) Q1 Earnings Up Y/Y, Segment Results Solid

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Berkshire Hathaway (BRK.B - Free Report) delivered first-quarter 2022 operating earnings of $7 billion, which increased 0.3% year over year. The increase was driven by higher earnings at Railroad, Utilities and Energy, as well as Manufacturing, Service and Retailing businesses.

Berkshire Hathaway Inc. Price, Consensus and EPS Surprise

 

Behind the Headlines

Revenues increased 9.6% year over year to $70.8 billion, attributable to higher insurance premiums earned.

Costs and expenses increased 11.4% year over year to $62.4 billion, largely due to an increase in costs and expenses in Insurance and Other and Railroad, Utilities and Energy.

Segment Performance

Berkshire Hathaway’s Insurance and Other segment revenues increased 5.7% year over year to $18.9 billion in the reported quarter on the back of higher insurance premiums earned. Pretax earnings dropped 39.8% to $1.4 billion.

Insurance underwriting produced operating earnings of $47 million in the first quarter of 2022 compared with $764 million in 2021. Underwriting earnings were negatively impacted by ongoing increases in claims severities at GEICO.

Railroad, Utilities and Energy operating revenues increased 5.5% year over year to $11.9 billion. Pre-tax earnings of Railroad increased 9% year over year to $7.9 billion, driven by higher revenue per car/unit, partly offset by lower overall freight volumes and higher average fuel costs. Pre-tax earnings of Utilities and Energy decreased 1% year over year to $0.7 billion.

Operating earnings from the Railroad business increased 9.6% year over year. Operating earnings of the Utilities and Energy business increased 6.7% in the first quarter of 2022 on higher earnings from the regulated utilities businesses, including increased production tax credits for renewable energy, and higher earnings from tax equity investments. However, lower earnings from the natural gas pipelines and real estate brokerage businesses were a partial offset.

Total revenues at Manufacturing, Service and Retailing increased 12.8% year over year to $40 billion. Pre-tax earnings increased 16.2% year over year to $4 billion.

Operating earnings increased 15.5% in the first quarter of 2022. Solid customer demand for products and services was weighed on by higher materials, freight, labor and other input costs attributable to ongoing disruptions in global supply chains.

Financial Position

As of Mar 31, 2022, consolidated shareholders’ equity was $516.9 billion, up 0.4% from the level as of Dec 31, 2021. At quarter-end, cash and cash equivalents were $39.1 billion, down 55.6% from the level at 2021 end.

Berkshire exited the first quarter of 2022 with a float of about $148 billion, up from $147 billion from the figure at year-end 2021.

Cash flow from operating activities totaled $6.8 billion in the reported quarter, down 26.6% from the year-ago period.

Berkshire Hathaway bought back shares worth $3.2 billion in the first quarter of 2022.

Zacks Rank

Berkshire currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Some Other P&C Insurers

Of the insurance industry players that have reported first-quarter results so far, The Travelers Companies (TRV - Free Report) and RLI Corporation (RLI - Free Report) beat the respective Zacks Consensus Estimate for earnings, while The Progressive Corporation (PGR - Free Report) missed the mark.

Travelers reported first-quarter 2022 core income of $4.22 per share, which beat the Zacks Consensus Estimate by 14% and increased 54.6% year over year. Total revenues increased 6.8% from the year-ago quarter to $8.8 billion, primarily due to higher premiums and fee income but missed the consensus estimate. Travelers’ combined ratio deteriorated 530 bps year over year to 91.3.

RLI’s first-quarter 2022 operating earnings of $1.43 per share beat the Zacks Consensus Estimate by 40.2% and improved 64.4% from the prior-year quarter. Operating revenues were $287 million, up 17.1% year over year and beat the Zacks Consensus Estimate by 0.8%. RLI’s gross premiums written increased 22% year over year to $359.2 million. The combined ratio improved 900 bps year over year to 77.9.

Progressive’s first-quarter 2022 earnings per share of $1.12 missed the Zacks Consensus Estimate of $1.24 and declined 34.9% from the year-ago quarter. Net premiums written were $13.2 billion in the quarter, up 12% from $11.7 billion a year ago. Progressive’s combined ratio deteriorated 520 bps from the prior-year quarter to 94.7.