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Can Berkshire Hathaway (BRK.B) Surprise with Q1 Earnings?

Berkshire Hathaway Inc. BRK.B is scheduled to report first-quarter 2016 results on May 6. In the last quarter, this company delivered an 8.00% positive earnings surprise. Let’s see how things are shaping up for this announcement.

Factors Influencing this Past Quarter

Berkshire Hathaway is expected to have performed well on the strength of its insurance, financials and manufacturing segments. Insurance earnings are estimated at $1.1 million, comprising insurance underwriting income of $213 million and insurance income of $919 million.

The Finance segment is expected to deliver earnings of $311 million improving 8% year over year. Projected earnings are $1.2 billion for railroad, utilities and energy and $1.3 billion for manufacturing, service & retailing. Together these are lead to lead to operating earnings of $3.7 billion, down 12% year over year. Net earnings are expected to be $5.6 billion, up 8% year over year.

Strategic acquisitions should continue to support results.

However, Berkshire Hathaway’s insurance business remains exposed to catastrophe and high expenses incurred on rail road operations, which can taper margins.

With respect to the surprise trend, Berkshire Hathaway surpassed expectations in two of the last four quarters, with an average beat of negative 3.42%.

The company’s share price has been fluctuating over the last few days. We wait to see how the stock reacts to the quarter’s results.

Earnings Whispers

Our proven model does not conclusively show that Berkshire Hathaway will beat the Zacks Consensus Estimate in the first quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) for this to happen. But this is not the case here as elaborated below.

Zacks ESP: Berkshire Hathaway has an Earnings ESP of 0.00%. This is because both Most Accurate estimate and the Zacks Consensus Estimate are pegged at $1.75.

Zacks Rank: Berkshire Hathaway has a Zacks Rank #3, which increases the predictive power of ESP. However, an Earnings ESP of 0.00% makes surprise prediction difficult.

The Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

Stocks to Consider

Here are some companies that you may want to consider as these have the right combination of elements to post an earnings beat this quarter:  

Physicians Realty Trust DOC has an Earnings ESP of +4.35% and a Zacks Rank #3. The company is scheduled to report its first-quarter earnings results on May 5.

Fidus Investment Corporation FDUS has an Earnings ESP of +2.44% and a Zacks Rank #1. The company is scheduled to report its first-quarter earnings results on May 5.

Garrison Capital Inc. GARS has an Earnings ESP of +6.25% and a Zacks Rank #3. The company is scheduled to report its first-quarter earnings results on May 9.

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GARRISON CAPITL (GARS): Free Stock Analysis Report
 
BERKSHIRE HTH-B (BRK.B): Free Stock Analysis Report
 
PHYSICIANS RLTY (DOC): Free Stock Analysis Report
 
FIDUS INVESTMNT (FDUS): Free Stock Analysis Report
 
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