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What Berkshire Hathaway Expects from 2Q17

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Jul. 12 2017, Published 10:32 a.m. ET

BRK.B’s 2Q17 performance

Berkshire Hathaway (BRK.B) is expected to post EPS (earnings per share) of $2,806 in 2Q17 and $3,212 in 3Q17. The 2Q17 expectations reflect marginal growth on a YoY (year-over-year) basis and strong growth sequentially, primarily due to improvements in the manufacturing sector and the stable performance of its holdings.

Berkshire’s energy investments are expected to see lower growth sequentially due to weak oil prices (USO), partially offset by the higher utilization of energy units through stations.

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BRK.B’s 1Q17 performance

In 1Q17, Berkshire managed EPS of $2,163, missing its estimate of $2,666. The decline was mainly due to a weaker performance in the insurance space, partly offset by the Energy and Service divisions.

Its operating income fell 5% to $3.6 billion on a YoY basis. The company’s book value rose by 3.5% to $178,073, reflecting an appreciation of holdings.

Berkshire stock has risen 0.33% in the past month and 19.1% in the past year. By comparison, the S&P 500 (SPX-INDEX) (SPY) has fallen 0.26% in the past month and 13.9% in the past year.

Utilizing resources

As of March 31, 2017, Berkshire had a record $96.5 billion in liquidity. The company is looking for investments as well as major takeovers in a bid to deploy funds. Buffett is now looking at options in manufacturing, industrials, and real estate investments.

With a market capitalization of ~$424.0 billion, Berkshire Hathaway is one of the biggest holding companies and has subsidiaries engaged in businesses across all major sectors, including insurance and reinsurance, utilities and energy, finance, freight rail transportation, manufacturing, and service and retail.

Berkshire’s insurance and asset management model competes with major players like BlackRock (BLK), Prudential (PRU), American International Group (AIG), and MetLife (MET).

In this series, we’ll assess Berkshire’s expected performance in 2Q17 for its various divisions. We’ll also study Berkshire’s balance sheet, acquisition options, and valuations.

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