Will Berkshire Hathaway (BRK.B) Beat Earnings This Season? - Analyst Blog

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Berkshire Hathaway Inc. ( BRK.B ) is set to report second-quarter 2014 results on Aug 1.

In the last quarter, this conglomerate delivered a 1.4% negative earnings surprise. The average beat for the trailing four quarters is 7%.

Will Berkshire Hathaway be able to keep its earnings streak alive this quarter? Let's see what factors might have influenced the earnings report this time around.

Factors Likely to Influence Q2 Results

Berkshire Hathaway engages in a number of diverse business activities and therefore the company's earnings are buffered from the impact of any single factor. Several big and small acquisitions made by Warren Buffett over the past five decades along with recent acquisitions will drive the company's earnings. More specifically, we expect that its biggest segments - insurance, railroad and energy, and finance and financial products - will contribute to the quarter's earnings to a large extent.

In the last quarter, revenues and operating expenses of the railroad operations were negatively impacted by adverse weather conditions and service-related challenges. We expect higher contribution from this segment as the weather conditions reversed in the second quarter.

Moreover, calmer-than-average weather in 2014 will result in low claims and thus drive the company's earnings in insurance segment.

Berkshire Hathaway's  finance and financial products segment is also expected to perform well after enduring a soft housing market in the recent past. We expect continued improving trends in this business segment given that the housing market is gradually recovering.   

Earnings Whispers

Our proven model does not conclusively show that Berkshire Hathaway is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. However, that is not the case here as you will see below.

Zacks ESP:  Berkshire Hathaway's Earnings ESP is 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.75 per share.

Zacks Rank:  Berkshire Hathaway has a Zacks Rank #3 (Hold). Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company's ESP of 0.00% makes surprise prediction difficult.

Other Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:  

Voya Financial, Inc. ( VOYA ) has an Earnings ESP of +2.9% and a Zacks Rank #2 (Buy).

Alliant Energy Corp. ( LNT ) has an Earnings ESP of +12.1% and Zacks Rank #3.

Protective Life Corp. ( PL ) has an Earnings ESP of +0.8% and a Zacks Rank #3.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

BERKSHIRE HTH-B (BRK.B): Free Stock Analysis Report

VOYA FINANCIAL (VOYA): Free Stock Analysis Report

PROTECTIVE LIFE (PL): Free Stock Analysis Report

ALLIANT ENGY CP (LNT): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
Referenced Symbols: VOYA , LNT

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