UBS Raises Price Target on Buffet's Berkshire Hathaway (BRK-a) By $1000
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UBS analyst Brian Meredith reiterated a Buy rating and lifted his price target on Warren Buffett's Berkshire Hathaway (NYSE: BRK-A) to $245,500.00 (from $244,500.00), saying GEICO continues to improve while the rail and MSR segments continue to be a drag.
Meredith commented, "The unfavorable variance from our estimate was driven primarily by lower pre-tax earnings from Manufacturing, Service, Retailing ($149 p/sh) and BNSF ($45 p/sh). These headwinds were partially offset by better than expected pre-tax earnings from the Insurance group ($45 p/sh), which benefitted from better than expected underwriting income at GEICO and higher investment income. Results for MSR now include a full quarter of earnings from Precision Castparts and Duracell, which were acquired on January 29th and February 29th, respectively. BVPS of $160,009 (UBSe $160,582) was up 1.7% q/q and float grew 5% y/y to $90bn. The company's cash position improved to a record $61.8bn from $53.6bn at the end of 1Q16 due largely to the redemption of Kraft Heinz preferred stock ($8.3bn)."
He added, "GEICO's underwriting results improved in 2Q16 (97.6% CR vs. 99.1% CR in 2Q15) despite $190mm of catastrophe losses from Texas storms as the rate increases from 2015 earn into results. BNSF revenues and earnings declined by double digits as higher stockpiles of coal and low oil prices negatively impacted the shipment of coal and petroleum products. (These trends are unlikely to abate before the end of the year.) BH Energy produced relatively flat results as lower energy costs more than offset lower energy revenues, benefitting margins modestly. MSR (excl. PCP and Duracell) saw revenues decline on continued soft market condition in its industrial businesses and lower NetJets revenues due to lower aircraft sales."
The analyst lowered FY 2016 EPS from $11,536.19 to $11,234.90 and FY 2017 EPS from $12,936.37 to $12,489.09.
Shares of Berkshire Hathaway closed at $218010.00 yesterday.
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