This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Cramer's Action Alerts PLUS - See his portfolio and get alerts BEFORE every trade. Learn more NOW!

Berkshire Hathaway Earnings Confirm Warren Buffett’s Bet on U.S. Recovery

NEW YORK (TheStreet) - Berkshire Hathaway (BRK.B - Get Report) reported better-than-forecast second-quarter earnings as sales growth at the Warren Buffett-run conglomerate returned, confirming a strengthening recovery in the U.S. economy.

Berkshire's earnings add proof that a first-quarter slowdown in U.S. economic activity was the result of unseasonably bad weather and not a deteriorating economy. Like the rest of the country, Berkshire rebounded strongly in the second quarter.

Read More: Synchrony IPO A New Way to Bet on Big Box Recovery

Overall, the conglomerate reported $49.8 billion in revenue and $2,643 in earnings per Class A share, beating analyst estimates compiled by Bloomberg on both the top and bottom lines. The company saw operating earnings rise 10% in the second quarter to $4.3 billion.

Analysts expected Berkshire Hathaway to earn $48.86 billion in revenue and earnings per share of $2,482. Berkshire's portfolio of investments and derivatives rose by nearly $2 billion in the second quarter vs. a $622 million gain at this time a year ago.

By Warren Buffett's preferred valuation metric, Berkshire Hathaway performed in line with the S&P 500, a reversal of a trend of under-performance in recent years. Since the beginning of the year, the company's book value per Class A equivalent share has increased by 5.6% to $142,483.

Berkshire is often treated as a good proxy of the health of the U.S. economy and its earnings over the first half of 2014 have proved that maxim.

Gross domestic product slumped 2.1% in the first quarter as a result of bad weather, however, GDP rebounded strongly in the second quarter, rising 4% according to data released by the Commerce Department. The 10% rise in operating earnings Berkshire posted in the second quarter, perhaps, is also indicative of investors' belief that the company has outsized exposure to a U.S. economic recovery.

Of note, revenue at Berkshire's railroad, utilities and energy divisions rose to $9.84 billion, an over 17% rise in the second quarter from year-ago levels. Insurance revenue rose over 11% to $38.1 billion, indicating an improvement in the division's performance.

Overall, performance remained strong in Berkshire's railroad, energy and industrial businesses. Top-line revenue appears to have been positively impacted by the performance of Berkshire's investments, a rebound in insurance sales and acqusitions.

S&P Capital IQ analyst Cathy Seifert said Berkshire's results were buoyed by the firm's economically sensitive business units. Insurance revenues were better than Siefert had forecast, she said by telephone. Nonetheless, Seifert still characterized Berkshire's insurance results as mixed. She highlighted that cash balances at Berkshire grew by $7 billion in the quarter.

Read More: 4 Stocks Berkshire is Selling

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
BRK.A $219,000.00 -0.62%
BRK.B $145.93 -0.78%
AAPL $129.36 0.21%
FB $79.60 -0.19%
GOOG $573.64 0.40%

Markets

DOW 18,203.37 -85.26 -0.47%
S&P 500 2,107.78 -9.61 -0.45%
NASDAQ 4,979.9010 -28.1950 -0.56%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs