Here's How Cost of Sales & Services Shapes BRK.B's Margins and Growth

For Berkshire Hathaway (BRK.B), the cost of sales and services is an important driver determining profitability, operational efficiency and long-term growth. Being a holding company, it owns subsidiaries engaged in numerous diverse business activities. As a diversified conglomerate, it has operations spanning insurance, railroads, energy, manufacturing, services, and retailing. 

Cost of sales and services thus majorly include costs to deliver products or services across its wide range of manufacturing, services, and retailing businesses, as well as Pilot (operates 677 travel centers and 77 fuel-only retail locations across the U.S. and in five Canadian provinces) and McLane (provides wholesale distribution services in all 50 states).

Cost of sales and services represents about 50% of Berkshire Hathaway's total costs and expenses. It also represents about 45% of total revenues.  These costs directly impact margin and operating leverage. It is very important to keep the magnitude of rise in cost lower than revenue growth, hence enabling margin expansion and freeing up cash for reinvestment.

Berkshire’s strategy depends on reinvesting retained earnings into acquisitions, capital projects, and marketable securities, making cost efficiency vital to its compounding growth. Its decentralized management model enables subsidiaries to independently innovate and control expenses, strengthening competitive advantages, preserving margins, and ultimately driving consistent long-term value creation for the conglomerate.

What About BRK.B’s Peers?

For 3M Company MMM, the cost of sales and services includes raw materials, manufacturing processes, and distribution costs across its diverse product lines. Effective cost management enables 3M Company to improve operating leverage.

For Honeywell International HON, these costs encompass production, engineering, and service delivery activities essential to operations. Such cost control helps Honeywell International improve profitability, cash generation, and margin expansion.

 Both 3M Company and Honeywell International emphasize cost efficiency to enhance competitiveness, sustain operating margins and drive consistent long-term growth.

BRK.B’s Price Performance

Shares of BRK.B have gained 6.6% year to date, in line with the industry. 

BRK.B’s Expensive Valuation

BRK.B trades at a price-to-book value ratio of 1.57, above the industry average of 1.52. 

Estimates Movement for BRK.B

The Zacks Consensus Estimate for BRK.B’s third-quarter 2025 EPS has witnessed 23% upside over the past 30 days, while that for the fourth quarter has seen no movement. The consensus estimate for full-year 2025 has moved 0.3% north over the past 30 days, while that for 2026 has witnessed no movement.
 

The consensus estimates for BRK.B’s 2025 and 2026 revenues indicate year-over-year increases. While the consensus estimate for BRK.B’s 2025 EPS indicates a year-over-year decline, the same for 2026 suggests an increase.  

BRK.B stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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