As the economy is doing way better than what market pundits predicted back in 2020, businesses across industries are performing exceptionally well and reporting solid revenues and earnings.
Berkshire Hathaway (BRK.A)(BRK.B), which engages in diverse business activities including insurance, manufacturing, retailing, energy, utilities, and railroad, among others, is benefitting from an uptick in economic activities and ongoing recovery in demand.
Thanks to the improving macro environment, Berkshire Hathaway posted operating earnings of $13.7 billion in the first half of 2021. This represents a healthy year-over-year growth of about 20%. Meanwhile, Berkshire Hathaway stock is trading well above the pre-pandemic levels and has gained over 24% this year. (See Berkshire Hathaway stock charts on TipRanks)
Despite its stock trading at record highs, the company continued to repurchase its shares aggressively. Per its recent quarterly filings, the company bought back shares worth $12.6 billion in the first half of 2021.
Furthermore, it ended the second quarter with cash & cash equivalents, including short-term investments in U.S. Treasury Bills, of $144.1 billion.
While many of Berkshire Hathaway’s businesses benefitted from the economic reopening, the company highlighted that “risks and uncertainties resulting from the pandemic” could adversely impact its future earnings and cash flows.
Berkshire Hathaway’s risk distribution profile on TipRanks indicates that Production, and Macro & Political risks, account for 50% of its total risks. Meanwhile, both these risk factors are significantly above the sector benchmark.
Since June 2020, the company has added one risk factor. Under its Macro & Political risk category, Berkshire Hathaway noted that its business performance is susceptible to pandemics and epidemics. Highlighting the COVID-19 outbreak, the company said that the pandemic “has adversely affected, and in the future it or other epidemics, pandemics or outbreaks may adversely affect, our operations, including our equity securities portfolio.”
This is not surprising, given Berkshire Hathaway’s diverse businesses and their reliance on economic activities.
Citing the rebound in economic activities, UBS analyst Brian Meredith maintained a Buy rating on Berkshire Hathaway and increased his price target to $329 (14.3% upside potential) on Class B shares from $319.
TipRanks’ Stock Investors tool shows that investors currently have a Very Positive stance on Berkshire Hathaway stock, with 5.9% of investors who hold portfolios on TipRanks having increased their exposure in the last 30 days.
Disclosure: Amit Singh held no position in any of the stocks mentioned in this article at the time of publication.
Disclaimer: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities.
