Berkshire Hathaway Inc.
(
BRK.A
)(
BRK.B
) reported its second quarter 2012 operating earnings of $1.50 per
share, compared with earnings of $1.09 in the year-ago quarter.
Net income (a GAAP measure), which includes a number of one-time
items, came in at $1.25 per share, down from $1.38 per share earned
in the year-ago quarter. The decline in earnings was the result of
loss on sale of derivative contracts
Total revenue inched up 0.7% year over year to $38.5 billion, led
by higher revenues across all its business segments.
Segment Results
The
Insurance Group
segment reported revenue of $9.8 billion, down 5.1% year over year.
The segment reported a net insurance underwriting gain of $617
million as against an underwriting loss of $7 million in the
year-ago quarter, a period which was marked by significant
catastrophe losses.
The
Railroad, Utilities and Energy
segment's total revenue increased 4.6% year over year to $7.8
billion. Of the total segment's revenue, approximately 65% 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, thereby
resulting in greater consumer demand for the segment. The trend is
likely to continue in the future. Revenue from MidAmerican, which
comprises other businesses of the segment, remained almost
unchanged at $2.7 billion.
Total revenue of the
Manufacturing, Service and Retailing
segment climbed up 14.3% year over year to $20.8 billion, on the
back of an increase in all the sub-businesses - Marmon, McLane
Company, Other manufacturing and service and Retailing.
Marmon's revenue improved 4.6%, McLane's 6.6% and other
manufacturing, servicing and Retailing, which includes a wide array
of businesses, saw a 35% increase in revenue.
The
Finance & Financial Products
segment's total revenue hiked 2.5% year over year to $1.02 billion.
The increase was attributable to a 3.5% and 1.6% rise in revenue
from the segment's manufactured housing & finance and furniture
/transportation equipment leasing businesses, respectively.
Omaha-based Berkshire continues to boost its balance sheet.
Consolidated shareholders' equity or net worth as of June 30, 2012
was $181.7 billion, up 7.5% from December 31, 2011.
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 its heavy exposure to stock option derivatives. However,
most of these derivative gains/losses are unrealized.
Other than the derivatives-related earnings fluctuations, we see
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 due to a soft housing market, is also recovering
gradually. Going forward, we expect the company to perform
favorably.
We maintain our 'Outperform' recommendation on the shares of
Berkshire Hathaway. The stock retains a Zacks #3 Rank, which
translates into a short-term Hold rating.
BERKSHIRE HTH-A (BRK.A): Free Stock Analysis
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BERKSHIRE HTH-B (BRK.B): Free Stock Analysis
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