uploads/2017/08/Services.png

What Led to the Expansion of Berkshire Services Segment in 2Q17?

By

Updated

Services and retailing

Berkshire Hathaway’s (BRK.B) Services and Retail division managed to post growth of 8% and revenues to $6.55 billion in 2Q17 compared to $6.39 billion in the prior year. The growth came mainly due to higher traction in NetJets and TTI, its electronic equipment company. The services division has seen slower growth in the recent quarters mainly due to subdued growth in the financial services, housing finance, media, and logistics businesses. Berkshire’s services and retailing division posted EBT (earnings before tax) of $555 million in 2Q17 compared with $457 million a year ago.

Article continues below advertisement

Berkshire Hathaway’s services managed revenues of $2.79 billion, and retail added $3.76 billion, reflecting growth across the divisions. The company’s major peers including asset managers (IYF) Blackstone (BX), BlackRock (BLK), and Carlyle (CG), have deployed significant funds toward services in the US. These investments are being made in the areas of financial technology, information technology, and automation.

Retailing

Berkshire’s major retail business includes the home furnishing business, auto dealerships, the jewelry retailing business, kitchen tools, trading companies, and motorcycle accessories. The 2Q17 revenues for retailing businesses were impacted mainly due to lower revenues of Berkshire Hathaway Automotive (or BHA) due to lower unit sales, partly offset by higher revenues of home furnishings retailers, Pampered Chef, and See’s Candies. Pre-tax earnings for retailing businesses increased by 27% in 2Q17 mainly due to higher margins in dealerships, kitchen tools, and confectionery product businesses.

The retailing business managed revenues of $3.76 billion and pre-tax earnings of $204 million in 2Q17 compared to $3.81 billion and $161 million, respectively in 2Q16.

Advertisement

More From Market Realist