occurrences
According to market news, Berkshire Hathaway will release its Q2 earnings report on August 4, 2023. In the second quarter, the US stock market ushered in a strong bull market, and the price of Berkshire's heavy-held stock, Apple, continued to rise sharply.
Core views
1. Understanding the forward-looking priorities of Berkshire's Q2 earnings report from a business perspective
Berkshire's business is divided into operating activities and investment activities. It obtains profits and earns cash flow through diversified business activities and low-cost financing, and then earns income through investment activities. Therefore, the outlook for Berkshire's Q2 earnings needs to be analyzed from two dimensions: the operating conditions of major holding companies and the general performance of the US stock market.
2. Business activities have benefited from the US recovery, and performance is expected to continue to grow
Berkshire's business model is very diverse, and it operates through holding subsidiaries in many different industries. For leading companies in a stable competitive industry, revenue growth is basically in line with industry growth, and revenue is highly linked to the US macroeconomy. With the steady performance of the US economy and continuing to expand, Berkshire's operating performance in Q2 is expected to grow.
3. The investment business is the focus, benefiting from the upward trend in US stocks and the strong performance of heavy-held stocks
In the short term, Berkshire vigorously buys short-term maturing treasury bonds to seek more definite returns, while stock investment remains Berkshire's top priority, and investment performance will benefit from the overall rise in the US stock market. In addition, Berkshire's heavyweight stock, Apple, had a very strong stock price performance in Q2 2023. Based on a 5.8% shareholding ratio, Apple can probably contribute 31.87 billion US dollars in profit to Berkshire.
Profit forecasting
For targets such as Berkshire, which have a mature market and a very stable shareholder base, short-term profit performance reflects market confidence to a certain extent. Currently, Bloomberg's consistent forecast for Berkshire's EPS for Q2 2023 is 5,652 US dollars/share, while the EPS for Q1 2023 is 24,400 US dollars. As the second-tier US stock market continues to rise, and heavy-held stocks remain strong, Berkshire's profitability is likely to exceed market expectations against the backdrop of the continued strength of the US economy in the second quarter.
Risk warning
The departure or failure of key personnel may have a negative impact on investment decisions; highly concentrated equity investments make companies vulnerable to stock market fluctuations; and an unfavorable economic environment may reduce operating income and increase financing costs.
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