Will Berkshire Hathaway (BRK.B) Earnings Surprise in Q4?

Berkshire Hathaway Inc. (BRK.B) is set to report fourth-quarter and full-year 2014 results on Feb 28.

In the last quarter, this conglomerate delivered a positive earnings surprise of 12.4%. The average beat for the trailing four quarters is 5.07%.

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 Q4 Results

Berkshire Hathaway derives earnings from different verticals since it houses a range of businesses from ice cream to insurance. Its earnings are therefore 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 should 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, the biggest contributor to the group’s revenue was its railroad and energy business. We expect the performance to continue as the economy gains momentum and more goods are moved from one place to another. Earnings may, however, be affected by service related challenges.

Moreover, no significant catastrophic claims in 2014 will provide an added boost to the insurance segment’s bottom line.

Nevertheless, the results might suffer from fluctuations in earnings from investment and derivatives. In the previous quarter, profit fell 8.6% from the year-earlier gain on account of loss on investments and derivatives.

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 $1.80 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:

Ares Commercial Real Estate Corporation (ACRE) with an Earnings ESP of +3.45% and a Zacks Rank #2 (Buy)

Banc of California, Inc. (BANC) with an Earnings ESP of +29.41% and Zacks Rank #3

Cherry Hill Mortgage Investment Corporation (CHMI) with an Earnings ESP of +12.77% and a Zacks Rank #3