It has been about a month since the last earnings report for Berkshire Hathaway Inc. (BRK.B). Shares have added about 3.6% 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 its most recent earnings report in order to get a better handle on the important drivers.
Berkshire’s Q3 Earnings Up Y/Y on Solid Segmental Show
Berkshire Hathaway delivered third-quarter operating earnings of $7.9 billion, which increased 14.2% year over year.
This improvement was mainly due to better performance across all its segments.
Behind the Headlines
Revenues increased 2.4% year over year to nearly $64 billion.
Costs and expenses increased 1.3% year over year to $56.1 billion.
Pre-tax income came in at $20.5 billion, down 11.5% year over year.
Berkshire Hathaway’s huge and growing Insurance Operations segment has kept its underwriting profit streak alive for more than 15 years. Revenues from the Insurance group increased 8.4% year over year to $17.1 billion. This segment’s net earnings attributable to Berkshire Hathaway were $1.9 billion, up 14.5% year over year.
Railroad, Utilities and Energy operating revenues decreased 0.8% year over year to $11.7 billion owing to lower contribution from Burlington Northern SantaFe Corp. (BNSF). Net earnings of $2.6 billion were up 6.4% year over year driven by 5.2% increase from railroad business as well as an 8% increase from the utilities and energy business. Earnings of railroad business benefited from higher rates per car/unit, a curtailment gain related to an amendment to defined benefit retirement plans and ongoing operating cost control initiatives.
Total revenues at Manufacturing, Service and Retailing rose 0.4% year over year to $35.9 billion. Net earnings grew 1.8% year over year to $2.5 billion.
As of Sep 30, 2019, consolidated shareholders’ equity was $397.6 billion, up 14% from the level as of Dec 31, 2018. At quarter-end, cash and cash equivalents were $74.8 billion, up 146.3% from the level at 2018 end.
Berkshire’s debt was $102.2 billion as on Sep 30, 2019, a 4.8% increase since Dec 31, 2018.
The company exited the third quarter with a float of about $127 billion, up $4 billion from year-end 2018.
Cash flow from operating activities totaled $26.6 billion in the first nine months of 2019, up 0.2% year over year.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -8.48% due to these changes.
At this time, Berkshire Hathaway Inc. has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Berkshire Hathaway Inc. has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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