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Berkshire Hathaway (BRK.B) to Report Q2 Earnings: What's Up?

Zacks Equity Research

Berkshire Hathaway Inc. BRK.B delivered positive surprise in three of the last four reported quarters. The Zacks Consensus Estimate for the second quarter of 2019 is pegged at $2.71 per share, indicating a decrease of 2.9% from the year-ago quarter reported figure.

Let’s see what is in store for the company in the soon-to-be reported quarter.

Berkshire Hathaway’s second-quarter results are likely to benefit from improved performances across segments.

The company 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. A benign catastrophe environment is likely to aid underwriting profitability of its insurance operations. Combined ratio is thus likely to improve. Better pricing, compelling product portfolio, prudent underwriting and increase in policy writing is expected to drive premiums in the quarter. Continued insurance business growth also fuels increase in float.

The Utilities and Energy business is likely to deliver better numbers with higher revenue contributions from Burlington Northern SantaFe Corp.

A likely increase in unit volume and higher average revenue per car/unit should aid earnings of railroad business.

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. Given an improving macro backdrop, these units are likely to deliver better results.

Strategic acquisitions should also support the company’s results.

However, expenses are likely to hamper margin expansion.

What Our Quantitative Model Predicts

Our proven model does not conclusively show that Berkshire Hathaway is likely to beat estimates this earnings season. This is because a stock needs to have the right combination of a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you can see below:

Earnings ESP: Berkshire Hathaway has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $2.71. 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 and EPS Surprise

Berkshire Hathaway Inc. price-eps-surprise | Berkshire Hathaway Inc. Quote

Zacks Rank: Berkshire Hathaway carries a Zacks Rank #3.  

We caution against Zacks Rank #4 (Sell) or #5 (Strong Sell) stocks going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Some stocks from the insurance industry with the right combination of elements to surpass estimates this time around are as follows:

Lincoln National LNC has an Earnings ESP of +0.47% and a Zacks Rank of 3. The company is slated to announce second-quarter earnings on Jul 31. You can see the complete list of today’s Zacks #1 Rank stocks here.

NMI Holdings NMIH has an Earnings ESP of +0.46% and a Zacks Rank of 2. The company is scheduled to release second-quarter earnings on Jul 31.

The Hartford Financial Services Group HIG is set to report second-quarter earnings on Aug 1. The company has an Earnings ESP of +0.54% and a Zacks Rank #3.  

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