Could Services Revenues Rebound for Berkshire Hathaway in 2H17?
Weaker housing finance
Berkshire Hathaway’s (BRK.B) services and retail divisions generate revenues from financial services, electronics, jet services, housing finance, media, and logistics. However, the company hasn’t made any big acquisitions in these sectors in recent quarters. In the second half of 2017, the division could generate higher revenues on jet services, electronics, media, and logistics, partially offset by subdued earnings in housing and other finances.
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Berkshire’s services division had revenues of $2.8 billion, and the retail division’s revenues were $3.8 billion, reflecting growth across both divisions. The company’s major competitors with high services revenues include private equity and managers (XLF) Blackstone Group (BX), BlackRock (BLK), and Carlyle Group (CG). Investments in service areas are flowing toward financial technology, information technology, and automation.
In the retail business, Berkshire hasn’t made investments or bought businesses with online platforms such as eBay (EBAY) or Amazon (AMZN). Its retail business includes the jewelry retailing business, home furnishings business, trading companies, auto dealerships, kitchen tools, and motorcycle accessories.
In the second half of 2017, its auto dealership business might see some rebound, whereas furnishings and kitchen tools are expected to grow at a faster pace. In 2Q17, pre-tax earnings for the retail division rose 27.0%, mainly due to higher margins in dealerships, kitchen tools, and confectionery products.