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Berkshire (BRK.B) Q2 Earnings Down on Soft Segment Results

Berkshire Hathaway Inc. BRK.B delivered second-quarter 2020 operating earnings of $5.5 billion that decreased 10.6% year over year.

Soft performance in Railroad, Utilities and Energy as well as Manufacturing, Service and Retailing resulted in the decline. However, better results at Insurance and Other acted as a partial offset.

Behind the Headlines

Revenues decreased 10.6% year over year to $56.8 billion, attributable to lower revenues from Insurance and Other operations as well as Railroad, Utilities and Energy.

Costs and expenses increased 9.4% year over year to $61.3 billion, largely due to increase in costs and expenses in Insurance and Other.

Berkshire Hathaway Inc. Price, Consensus and EPS Surprise

Berkshire Hathaway Inc. price-consensus-eps-surprise-chart | Berkshire Hathaway Inc. Quote

Segment Results

Berkshire Hathaway’s Insurance and Other segment revenues increased 4.2% year over year to $17.2 billion in the second quarter of 2020 on the back of higher insurance premiums earned. Pretax earnings were $2.7 billion, up 26.7% year over year.

Railroad, Utilities and Energy operating revenues declined 14.7 year over year to $9.3 billion due to decrease in volume, average revenue per car/unit and soft energy business. Pretax earnings of $2.1 billion were down 14% year over year. Second-quarter earnings reflected lower shipping volumes, including the negative effects of COVID-19, partly offset by productivity improvements, which lowered operating costs, and soft Utilities as well as Energy business.

Total revenues at Manufacturing, Service and Retailing decreased 16% year over year to $30.3 billion. Pretax earnings declined 44.4% year over year to $1.9 billion. Impacts of COVID-19 weighed on the results.

Financial Position

As of Jun 30, 2020, consolidated shareholders’ equity was $393.5 billion, down 7.4% from the level as of Dec 31, 2019. At quarter end, cash and cash equivalents were $36.1 billion, down 43.8% from the level at 2019 end.

The company exited the first quarter of 2020 with a float of about $131 billion, up $2 billion from the figure at year-end 2019.

Cash flow from operating activities totaled $17.5 billion in the first half of 2020, up 4.2% from the year-ago period.

The company bought back shares worth $5.1 billion, taking the first half tally to $6.7 billion

Zacks Rank

Berkshire Hathaway currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Other Insurance Releases

Of the insurance industry players that have reported second-quarter results so far, The Progressive Corporation PGR, Cincinnati Financial CINF, and RLI Corp. RLI beat the respective Zacks Consensus Estimate for earnings.

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