Why Is Berkshire Hathaway B (BRK.B) Down 1.2% Since Last Earnings Report?
A month has gone by since the last earnings report for Berkshire Hathaway B (BRK.B). Shares have lost about 1.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Berkshire Hathaway B due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Berkshire Q1 Earnings Up Y/Y, Segment Results Solid
Berkshire Hathaway 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.
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.
How Have Estimates Been Moving Since Then?
Fresh estimates followed an upward path over the past two months.
VGM Scores
Currently, Berkshire Hathaway B has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Berkshire Hathaway B has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Berkshire Hathaway B is part of the Zacks Insurance - Property and Casualty industry. Over the past month, W.R. Berkley (WRB), a stock from the same industry, has gained 6.5%. The company reported its results for the quarter ended March 2022 more than a month ago.
W.R. Berkley reported revenues of $2.55 billion in the last reported quarter, representing a year-over-year change of +20.1%. EPS of $1.10 for the same period compares with $0.72 a year ago.
For the current quarter, W.R. Berkley is expected to post earnings of $0.87 per share, indicating a change of +11.5% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for W.R. Berkley. Also, the stock has a VGM Score of C.
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