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Berkshire Hathaway Inc. (BRK.B) Up 6% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Berkshire Hathaway Inc. (BRK.B - Free Report) . Shares have added about 6% 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 Inc. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Berkshire (BRK.B - Free Report) Q3 Earnings Up on Solid Insurance Operation

Berkshire Hathaway delivered third-quarter 2018 earnings of $6.9 billion, nearly doubled from $3.4 billion earned in the year-ago period. This improvement was mainly attributable to solid results across all segments. Insurance segment rebounded from the year-ago loss to post profit in the reported quarter.

Behind Third-Quarter Headlines

Revenues increased 6.6% year over year to $63.5 billion.

Costs and expenses inched up 0.3% year over year to $55.3 billion.

Pre-tax income came in at $23.1 billion, increasing about four-fold year over year.

Segment Results

Berkshire Hathaway’s huge and growing Insurance Operations segment kept its underwriting profit streak alive for more than 14 years. Revenues from the Insurance group rose 8.1% year over year to $15.8 billion. This segment’s net earnings attributable to Berkshire Hathaway were $441 billion, rebounding from the year-ago loss of $1.4 billion.

Railroad, Utilities and Energy operating revenues grew 11.1% year over year to $11.8 billion owing to higher contribution from both Burlington Northern SantaFe Corp. (BNSF) and Berkshire Hathaway Energy. Net earnings of $1.9 billion were up 24.6% year over year, primarily banking on a 33.7% bottom-line surge in the railroad business (driven by an expanded unit volume, higher average revenue per car/unit and a lower effective tax rate) as well as a 14.6% increase in the metric from the energy business.

Total revenues at Manufacturing, Service and Retailing rose 3.7% year over year to $33.3 billion. Net earnings grew 23.8% year over year to $2.1 billion.

Revenues at the company’s Finance & Financial Products jumped nearly 13% year over year to $2.4 billion. Net earnings improved 22.2% year over year to $390 million.

Financial Position

As of Sep 30, 2018, consolidated shareholders’ equity was $375.6 billion, up 7.8% from the level as of Dec 31, 2017. At the reported quarter-end, cash, cash equivalents and the U.S. Treasury bills were approximately $101.4 billion, down 7.9% from the level at 2017 end.

As of Sep 30, 2018, Berkshire Hathaway’s book value was $152.47 per share.

The company exited the third quarter with a float of about $118 billion, up 1.7% from the tally at year-end 2017.

Cash flows from operating activities totaled $26.5 billion in the first nine months of 2018, plunging nearly 29% from the count registered during the same period in 2017.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Berkshire Hathaway Inc. has a poor Growth Score of F, a grade with the same score on the momentum front. However, 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Berkshire Hathaway Inc. has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.




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