Nomura Holdings Tweaks Estimates for Berkshire Hathaway Inc. (BRK.A) Following Earnings

Nomura Holdings analyst Cliff Gallant weighed in with a few insights on Berkshire Hathaway Inc. (NYSE:BRK.A), after the investment giant reported third-quarter earnings in line with Nomura’s estimate of $4.6 billion. Berkshire holds about 27 percent of the stock in the Kraft Heinz Food Co., and it recorded a $4.4 billion after-tax gain as the result of the merger that was completed over the summer.

Gallant commented, “While lower oil prices continue to directly and indirectly impact businesses ranging from auto insurance to manufacturing to railways, the company controlled costs and continued to grow. Book value grew 1% over the quarter to $151,083 per share, as the expected Heinz gain was largely offset by declines in the equity portfolio.”

“While it would be highly uncharacteristic of senior management to “make a bet” on a commodity, Berkshire appears to have gone long oil. At GEICO, people across America appear to be driving more and enjoying low gas prices…and getting into more accidents. At BNSF, demand for railway cars has been impacted by the fortunes of the shale and fracing industry. In the manufacturing businesses as well, industrial demand has been impacted, although partially offset by lower production costs. The company’s newest investments, the pending acquisition of PCP and more shares of Phillips 66, raise the company’s exposure to oil, too. The low price of oil appears to be a consistent theme affecting several of Berkshire’s businesses,” the analyst continued.

The analyst concluded, “We are tweaking our earnings estimates to $10,619 from $10,417 for 2015 and to $12,481 from $12,621 for 2016 reflecting the quarter’s results. Our target remains $239,000, just 1.4-1.5x our expectation for 2016 book value, in our view an attractive valuation for a collection of quality companies producing significant positive cashflows.”

Gallant reiterated a Buy rating on Berkshire Hathaway shares, with a price target of $239,000, which implies an upside of 19% from current levels.

According to, which measures analysts’ and bloggers’ success rate based on how their calls perform, analyst Cliff Gallant has a total average return of 4% and a 63% success rate. Gallant has a 15.2% average return when recommending BRK.A, and is ranked #1648 out of 3832 analysts.


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