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Will Berkshire Hathaway (BRK.B) Earnings Surprise in Q4?

Zacks Equity Research

Berkshire Hathaway Inc. BRK.B BRK.A is expected to report fourth-quarter 2015 results on Feb 26, after the closing bell.

In the last quarter, this property and casualty insurer delivered a negative earnings surprise of 2.63%. Let's see what factors might influence earnings this time around.

Factors Likely to Influence Fourth-Quarter Results

Berkshire Hathaway’s strategic acquisitions will continue to support earnings in the to-be-reported quarter. The company is likely have benefitted from its stake in Kraft Heinz, and increased revenue contribution from Burlington Northern SantaFe Corp. (BNSF) and Van Tuyl Group among others.

The company’s top line is likely to be driven by contribution from the utilities and energy business.

Moreover, one of the company’s biggest segments –finance and financial products – is likely to drive fourth-quarter earnings.

However, Berkshire Hathaway’s insurance business remains exposed to catastrophe and high expenses incurred on rail road operations.

Earnings Whispers

Our proven model does not conclusively show that Berkshire Hathaway is likely to beat on earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. However, that is not the case here as you will see below.

Zacks ESP: Berkshire Hathaway’s Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.75 per share.

Zacks Rank: Berkshire Hathaway has a Zacks Rank #3 (Hold). Though this increases the predictive power of ESP, the company’s ESP of 0.00% makes our surprise prediction difficult.

Stocks to Consider

Here are some companies from the finance sector that have the right combination of elements to post an earnings beat this quarter:  

Apple Hospitality REIT, Inc. APLE with an Earnings ESP of +2.86% and a Zacks Rank #3. The company is scheduled to report fourth-quarter results on Feb 25.

Canadian Imperial Bank of Commerce CM with an Earnings ESP of +1.18% and a Zacks Rank #3. The company is scheduled to report fourth-quarter results on Feb 25.

Eagle Point Credit Company Inc ECC with an Earnings ESP of +5.36% and a Zacks Rank #3. The company is scheduled to report fourth-quarter results on Feb 26.
 

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