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Berkshire Beats by a Penny

Zacks Equity Research

Berkshire Hathaway Inc. (BRK.A) (BRK.B) reported fourth quarter 2012 operating earnings of $1.14 per share, a penny ahead of the Zacks Consensus Estimate. Results also compared favorably with $1.08 per share reported in the year-ago quarter.

Net income (a GAAP measure), which includes a number of one-time items, came in at $1.84 per share, up from $1.23 per share earned in the year-ago quarter. 


Total revenue for the quarter was $44.7 billion up from $38.0 billion in the year-ago quarter.


Full-Year Results


Full-year 2012 operating earnings were $5.10 per share, compared with $4.40 per share in the year-ago quarter. 


Total revenue were $162.4 billion up 13% year over year, led by higher revenues across all its business segments.


Segment Results


The Insurance Group segment reported revenue of $123.3 billion, up 11.4% year over year. Underwriting profit was $1.6 billion compared with $0.24 million in the year-ago quarter. 


The Railroad, Utilities and Energy segment’s total revenue increased 5.8% year over year to $32.6 billion. Of the total segment’s revenue, approximately 63% came from Burlington Northern Santa Fe – the railroad company, which was acquired in February 2010. An increase in industrial and agricultural activity has automatically revived the demand for rail services and this translates into greater consumer demand for the segment. The trend is likely to continue in the coming years as well. 


The Finance & Financial Products segment’s total revenue increased more than three- fold to $6.5 billion from $2.1 billion in the year-ago quarter. 


Consolidated shareholders’ equity at Dec 31, 2012 was $187.6 billion, an increase of $22.8 billion from Dec 31, 2011. Consolidated cash and investments was $176.3 billion at Dec 31, 2012.


In 2012, the company made a number of smaller-sized business acquisitions spending a total of $3.2 billion.


Berkshire is a conglomerate, which houses over 80 different businesses, along with equity investments in many companies. The company has seen its earnings fluctuate from one quarter to another due to heavy exposure to stock option derivatives. However, most of these gains/losses have been unrealized.


Results for the full year 2012 reflected that most of Berkshire’s businesses – Insurance, Railroad, Utilities and Energy, Manufacturing, Service and Retailing – performed well. Its Finance and Financial products segment, which had suffered as a result of a soft housing market, is also recovering gradually. Going forward, we expect the company to perform favorably.


Berkshire Hathaway retains a Zacks Rank #3 (Hold). Other players from the same industry such as The Chubb Corp. ( CB) and The Travelers Companies Inc. ( TRV) and The Allstate Corp. ( ALL), all reported earnings ahead of the Zacks Consensus Estimate. 

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