Berkshire Hathaway Inc. BRK.B reported first-quarter 2015 operating earnings of $1.72 per share, beating the Zacks Consensus Estimate by 6.2%. Earnings were also up 20.2% on a year-over-year basis.
The company’s better-than-expected earnings were a result of higher revenues at its Manufacturing, Servicing and Retailing segment. The other segments also contributed no less to the outperformance.
Revenues in the reported quarter came in at $49.7 billion, up 44% year over year.
Segment Results
Berkshire’s huge and growing insurance operation maintained its streak of underwriting profit, now seen for over 12 years. The operation also saw an increase in its float. Insurance Group revenues for the reported quarter increased 2.5% year over year to $10.6 billion, primarily led by a 27% increase in contribution from Berkshire Hathaway Primary Group. The float generated by the company’s insurance segment, has been customarily used by Warren Buffett to make investments. These investments come in the form of equity as well as acquisitions and have made the company a conglomerate of over 80 big and small subsidiaries. Operating earnings of the segment increased 4.1% year over year to $480 million.
Railroad, Utilities and Energy operating revenues increased 1.8% year over year to $9.9 billion. Operating earnings of $1.5 billion increased 24.7% year over year, primarily led by the railroad business which in turn benefitted from improved service levels and lower fuel and other operating expenses. We expect revenue growth in the segment, contingent upon growth in the U.S. economy.
Total revenue at Manufacturing, Service and Retailing increased 11.5% year over year to $25.1 billion. Operating earnings increased 20.4% year over year to $1.1 billion, led by the impact of business acquisitions and earnings growth in certain operations.
Revenues from Berkshire Hathaway's Finance & Financial Products – including Clayton Homes (manufactured housing and finance), CORT Business Services (furniture rental), Marmon (rail car and other transportation equipment manufacturing, repair, and leasing) and XTRA (over-the-road trailer leasing) – increased 8.3% year over year to $1.5 billion. Operating earnings increased 21.4% year over year to $289 million on the back of lower loan loss provisions on installment loan portfolios, lower interest expense on borrowings and improved manufacturing results.
Financial Position
Consolidated shareholders’ equity at Mar 31, 2015 was $244.8 billion, reflecting an increase of 0.7% since Dec 31, 2014. Consolidated cash approximated $63.7 billion at quarter end, up 0.6% from the Dec 31, 2014 level. With a huge cash hoard we believe that Berkshire Hathaway will continue its acquisition story. Last year, the company made 31 bolt-on acquisitions for an aggregate $7.8 billion. In the first quarter of 2015, Berkshire acquired the controlling interests of the Van Tuyl Group.
At Mar 31, 2015, Berkshire Hathaway’s book value was $98 per share, up 0.5% since year-end 2014.
Zacks Rank
Berkshire Hathaway carries a Zacks Rank # 3 (Hold).
Performance by Other Industry Players
Other players such as Allied World Assurance Company Holdings, AG AWH, Progressive Corp. PGR and Arch Capital Group Ltd. ACGL reported favorable first-quarter earnings, beating the respective Zacks Consensus Estimate by 19.2%, 7% and 5.4%.
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