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Berkshire Hathaway Warren Buffett (BRKB) publishes his shareholder letter widely followed on Saturday, but Kraft Heinz(KHC) is expected to touch Berkshire's fourth quarter results.
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On Thursday night, Kraft Heinz announced a $ 15.4 billion write-down, a dividend cut, an SEC investigation, and low profits, which resulted in a fall in stocks.
Berkshire Hathaway has more Kraft Heinz shares than any other major institution. In fact, the conglomerate led the merger of Kraft Foods and H.J. Heinz in 2015.
Buffett's Berkshire held more than 325 million shares of the food and beverage giant, accounting for 27% of the total, in the month of December. Berkshire chief executive Gregory Abel, considered 88-year-old Buffett's potential successor, also sits on the board of Kraft Heinz.
Barclays analyst Jay Gelb halved Berkshire Hathaway's earnings per share estimates after Kraft Heinz reduced its dividend and released a regulatory investigation. He is now expecting a profit of $ 1.15 per class B share for the fourth quarter, when Berkshire will report on Saturday. That's down from $ 2.35 earlier. For the full year, he now has a $ 8.88 EPS, up from $ 10.07 earlier.
Gelb also expects Berkshire's Q4 profits to suffer the catastrophic consequences of insurance losses related to Hurricane Michael and California wildfires. Insurance and reinsurance are among the largest companies in the conglomerate.
CFRA analyst Catherine Seifert also reduced the Berkshire BPA estimates for Q1 and 2018 by $ 1, to $ 1.30 and $ 9.03, respectively. She also talked about Kraft Heinz and the pressures of insurance, as well as Berkshire Energy's exposure to bankruptcy PG & E (PCG).
"We hope that Berkshire will inform investors of its strategy for this participation (Kraft Heinz)," she wrote Friday.
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In addition to the financial results, Gelb is expecting Buffett to discuss the succession of management and projects of his treasure trove of billions of dollars this weekend.
At Morgan Stanley, analysts hope to learn more about Berkshire's share buybacks and potential acquisition targets for this stock of cash.
They also hope to have an update on the status of a new health initiative with Amazon (AMZN) and JPMorgan Chase (JPM).
As for the equity investments of Berkshire, they are eager to better understand the growing stakes of financial companies, as well as its huge investments. Apple (AAPL), which experienced a reduction in Q4 after years of steady increases.
They are also curious to learn why Berkshire Hathaway bought Oracle (ORCL) in the 3rd quarter and completely abandoned in Q4, going against Buffett's long-term buying and preserving philosophy.
Berkshire Hathaway B shares lost 1.6% to 205.69 in Friday's stock market share. Shares sliced below the 200-day moving average but found support at 50 days. Kraft Heinz shares fell 27% to record levels. Apple's shares rose 0.6% on Friday, Amazon by 0.8% and JPMorgan Chase by 0.2%.
Buffett's letters to investors from Berkshire Hathaway, combining investment ideas and humor, have been published annually since 1977. They are archived on the Berkshire Hathaway website.
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The stock market, followed by the S & P 500, fell 14% in the fourth quarter. Falling stock markets should weigh on Berkshire's fourth quarter results. Buffett himself suggested investors look beyond the noise and focus on the underlying results of the conglomerate.
Morgan Stanley analysts expect Berkshire Hathaway to suffer a net loss of $ 22.4 billion in the fourth quarter, compared to a net profit of $ 32.6 billion a year ago.
Excluding losses on equity securities, they expect an operating profit increase of over 64% over the previous year.
Analysts expect the book value of Berkshire to decrease by 6% sequentially in the fourth quarter. "Losses of investment will be the main culprit," they said.
But they expect the book value to increase by 1% in 2018 – albeit the slowest pace since the 10% decline recorded in the 2008 financial crisis.
Analysts have not released a new note following information on Kraft Heinz, said Friday a spokesman for Morgan Stanley.
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