We are upgrading our recommendation on the shares of
Berkshire Hathaway Inc
) to Outperform from Neutral following solid first quarter
earnings, which included a 52.3% positive earnings surprise.
Results reflected strong performance across all the business
segments - Insurance, Railroad, Utilities and Energy,
Manufacturing, Service and Retailing as well as Finance and
BERKSHIRE HTH-A (BRK.A): Free Stock Analysis
BERKSHIRE HTH-B (BRK.B): Free Stock Analysis
MONTPELIER RE (MRH): Free Stock Analysis
HANOVER INSURAN (THG): Free Stock Analysis
ALLEGHANY CORP (Y): Free Stock Analysis
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Why the upgrade?
Berkshire's property and casualty insurance business has been the
engine behind its growth. The company's insurance business
maintains capital strength at exceptionally high levels. This
strength differentiates Berkshire's insurance companies from its
Berkshire's economically sensitive non-insurance businesses -
utilities and energy, and manufacturing, service and retail - are
performing well after suffering substantial earnings decline in
the recent past due to the weakness in the economy. The utilities
and energy business is supposed to bring key growth with
increased revenues expectation from BNSF (which provide railways
services through Burlington Northern Santa Fe Corp and was
acquired in Feb 2010). Revenue from BNSF has been a major
contributor to the company's revenue.
Moreover, Warren Buffett's unique skills have created tremendous
value for shareholders, with book value per share growing from
$19 to $95,453 over the last 46 years, at a rate of 20.2%
Following the earnings release, over the last 30 days, 1 of 2
estimates moved north pushing the Zacks Consensus Estimate for
2013 by 5.5% to $5.69. For 2014, one analyst covering the
stock, moved up the estimates by 8.1% to $6.30 per share.
Berkshire Hathaway retains a Zacks Rank #2 (Buy). Other players
from the same industry such as
Hanover Insurance Group Inc
Montpelier Re Holdings Ltd
), all carrying Zacks Rank #1(Strong Buy) are worth