Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) stock gained 2 percent on Monday morning after the company reported yet another solid quarter of growth on Saturday. Analysts say Berkshire has consistently generated exceptional revenue growth and profit margins, and Berkshire may soon be even more aggressive with its cash.
Berkshire reported second-quarter adjusted earnings per A-class share of $7,301 beating consensus analyst expectations of $3,387. Revenue for the quarter was $62.2 billion, up 8 percent from a year ago.
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Insurance underwriting income swung from a $22 million loss a year ago to a $942 million profit in the second quarter. Insurance investment income was up 18 percent to $1.14 billion. Railroad, utilities and energy income was up 28 percent to $1.89 billion. Other businesses revenue was up 29 percent to $2.57 billion. Overall operating earnings were up 67 percent to $6.89 billion.
In June, famed Berkshire Hathaway CEO Warren Buffett said “business is good” given the strength of the U.S. economy.
“Right now, there’s no question: it’s feeling strong,” Buffett said of the economy. “I mean, if we’re in the sixth inning, we have our sluggers coming to bat right now.”
Berkshire bounced back in the second quarter after a shaky start to the year and an accounting change resulted in a rare reported loss in the first quarter.
Berkshire did not provide third-quarter guidance for Berkshire investors, and Buffett has campaigned alongside J.P. Morgan Chase & Co. ( JPM) CEO Jamie Dimon this year to discourage other companies from issuing quarterly guidance as well. Buffett and Dimon say short-term guidance discourages long-term investment, growth and innovation and encourages short-term thinking.
Morningstar analyst Greggory Warren says Berkshire’s life insurance business was a key driver of its second-quarter earnings beat.
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“Looking more closely at Berkshire’s insurance operations, all three of the company’s insurance units — Geico, Berkshire Hathaway Reinsurance Group and Berkshire Hathaway Primary Group — reported earned premium growth during the second quarter,” Warren says.
Warren says investors can expect Berkshire to commit some of its excess cash of around $86 billion to investments, acquisitions and/or capital return initiatives in the third quarter.
Morningstar has an “undervalued” rating and $220 price target for BRK.B stock.
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Insurance Business Drives Berkshire Hathaway Inc. (BRK.B) Earnings Beat originally appeared on usnews.com
