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Berkshire Hathaway B (BRK.B) Up 1.7% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Berkshire Hathaway B (BRK.B). Shares have added about 1.7% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Berkshire Hathaway B 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 Hathaway Q1 Earnings & Revenues Rise Y/Y

Berkshire Hathaway delivered first-quarter 2023 operating earnings of $8.1 billion, which increased 12.6% year over year. The increase was driven by higher earnings at insurance underwriting, insurance-investment income, other controlled businesses and non-controlled businesses.

Behind the Headlines

Revenues increased 20.5% year over year to $85.4 billion, attributable to an increase in revenues in Insurance and Other and Railroad, Utilities and Energy.

Costs and expenses increased 22.2% year over year to $76.1 billion, largely driven by an increase in costs and expenses in Insurance and Other and Railroad, Utilities and Energy.

Segment Performance

Berkshire Hathaway’s Insurance and Other segment revenues increased 7.7% year over year to $63.4 billion in the reported quarter on the back of higher insurance premiums earned, sales and service revenues, leasing revenues, interest, dividend and other investment income.

Insurance underwriting produced operating earnings of $911 million in the first quarter of 2023 compared with $167 million in 2022.

Railroad operating revenues increased 1.9% year over year, primarily attributable to a 14% increase in average revenue per car/unit resulting from higher fuel surcharge revenues driven by higher fuel prices and increased rates per car/unit. It was partially offset by a 10.3% decrease in unit volume.

Pre-tax earnings of Railroad decreased 8.8% year over year to $1.6 billion.

Operating earnings from the Railroad business increased 8.8% year over year.

Total revenues at Manufacturing, Service and Retailing increased 3.1% year over year to $41.2 billion. Pre-tax earnings increased 2.4% year over year to $3.9 billion.

After-tax earnings from Manufacturing, Service and Retailing businesses decreased 1.4% year over year.

Financial Position

As of Mar 31, 2023, consolidated shareholders’ equity was $513 billion, up 6.5% from the level as of Dec 31, 2022. At quarter-end, cash and cash equivalents were $23.8 billion, down 26.2% from the level at the 2022 end.

Berkshire exited the first quarter of 2023 with a float of about $165 billion, up from $164 billion from the figure at year-end 2022.

Cash flow from operating activities totaled $8.7 billion in the reported quarter, up 27.3% from the year-ago period.

Berkshire Hathaway bought back shares worth $4.4 billion in the first quarter of 2023.

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How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

VGM Scores

Currently, Berkshire Hathaway B has a strong Growth Score of A, though it is lagging a bit on the Momentum Score front 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Berkshire Hathaway B has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.

Performance of an Industry Player

Berkshire Hathaway B belongs to the Zacks Insurance - Property and Casualty industry. Another stock from the same industry, NMI Holdings (NMIH), has gained 10.4% over the past month. More than a month has passed since the company reported results for the quarter ended March 2023.

NMI Holdings reported revenues of $136.78 million in the last reported quarter, representing a year-over-year change of +7.3%. EPS of $0.88 for the same period compares with $0.77 a year ago.

For the current quarter, NMI Holdings is expected to post earnings of $0.87 per share, indicating a change of +1.2% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.4% over the last 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for NMI Holdings. Also, the stock has a VGM Score of B.

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