What's in Store for Berkshire Hathaway (BRK.B) in Q2 Earnings?

Berkshire Hathaway Inc. BRK.B delivered a negative earnings surprise of 0.41%, on average, in the last four reported quarters. The Zacks Consensus Estimate for the second quarter of 2020 is pegged at $2.18 per share, indicating a decrease of 12.8% from the year-ago quarter reported figure.

Let’s see how things have shaped up prior to the announcement.

Berkshire Hathaway is the second largest property and casualty insurance company in terms of premium volumes. Its property and casualty insurance business generates maximum return on equity. The company’s performance in the soon-to-be-reported quarter is expected to have suffered due to catastrophe losses that include COVID-19 related losses, weather-related losses and losses from civil unrest. This is likely to have weighed on underwriting profit and resulted in deterioration of combined ratio.

However, better pricing, compelling product portfolio and prudent underwriting may have aided premium revenues. Continued insurance business growth is expected to have increased float.

Negative impact on volumes and average revenue per car/unit attributable to COVID-19 pandemic is likely to have weighed on earnings of the railroad business.

Lower sales are expected to have affected Manufacturing, Service and Retailing segment.

Berkshire Hathaway’s Finance and Financial Products segment units — CORT (furniture) and XTRA (semi-trailers) — are industry leaders. These have been witnessing considerable improvement in earnings with recovery in the soft housing market. However, given the pandemic, its earnings may have suffered.

Strategic acquisitions are expected to have aided the company’s performance.

However, expenses are likely to have hampered margin expansion.

Berkshire Hathaway Inc. Price and EPS Surprise

Berkshire Hathaway Inc. Price and EPS Surprise

Berkshire Hathaway Inc. price-eps-surprise | Berkshire Hathaway Inc. Quote

What the Zacks Model Says

Our proven model does not conclusively predict an earnings beat for Berkshire Hathaway this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. That is not the case as you can see below.

Earnings ESP: Berkshire Hathaway has an Earnings ESP of 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $2.18. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: Berkshire Hathaway currently carries a Zacks Rank of 2.

Stocks to Consider

Some insurance stocks with the right combination of elements to come up with an earnings beat this time around are:

Lincoln National LNC has an Earnings ESP of +1.87% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Conifer Holdings CNFR has an Earnings ESP of +68.42% and a Zacks Rank #3.

MetLife MET has an Earnings ESP of +1.30% and a Zacks Rank of 3.

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

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