Berkshire Hathaway Inc. BRK.B is expected to report first-quarter 2015 results on May 1, after the market close.
In the last quarter, this conglomerate delivered a negative earnings surprise of 10.6%. The company posted positive surprise in only one out of the last four reported quarters, with the average beat being 0.10%.
Will Berkshire Hathaway come up with a positive surprise this earnings season? Let's see what factors might have influenced the earnings report this time around.
Factors Likely to Influence Q1 Results
Berkshire Hathaway derives earnings from different verticals since it houses a range of businesses from ice cream to insurance. Therefore, its 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, the biggest contributor to Berkshire Hathaway’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 adversely affected by service-related challenges.
However, Berkshire Hathaway’s insurance segment will see a bottom-line drain from weather-related events that occurred in the U.S. in February.
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 $1.62 per share.
Zacks Rank: Berkshire Hathaway has a Zacks Rank #1 (Strong Buy). Though this increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
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:
American Capital, Ltd. ACAS with an Earnings ESP of +10.00% and a Zacks Rank #2 (Buy).
Ares Capital Corporation ARCC with an Earnings ESP of +5.13% and Zacks Rank #2.
RenaissanceRe Holdings Ltd. RNR with an Earnings ESP of +0.81% and a Zacks Rank #2.
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