Berkshire Hathaway Beats Estimates for Second Quarter Profits
Operating profit rose 39% in the second quarter, topping estimates, thanks to the strength of the company’s insurance and rail businesses as well as strong investment income.
The company continues to adjust its share buyback rate from a high in 2021, repurchasing only $1 billion in materials during the period, down from $3.2 billion in the first quarter, and a rate of about 7 percent. billion dollars a quarter in 2021.
(ticker: BRK/A, BRK/B) posted after-tax operating profit of $9.3 billion, up from $6.7 billion in Q2 2021. Earnings per Class A rose 43% to $6,312, topping FactSet consensus of $5,393 per share.
CEO Warren Buffett cares about price with Berkshire’s stock buybacks, and the company didn’t buy any shares in April, when shares were near record highs. Berkshire also didn’t buy shares in May, but resumed buying back in June.
Berkshire’s Class A stock ended Friday at $439,528 after peaking in late March at a record $544,000. The stock bottomed in late June below $400,000. The stock is down about 2% this year.
Berkshire’s overall after-tax profit showed a loss of $43.8 billion in the second quarter, compared with a profit of $28.1 billion in the same period last year. This was fueled by a stock market slump, which reduced the value of the company’s huge equity portfolio. That number came in at about $328 billion at the end of June, down from $390 billion on March 31. The S&P 500 index fell 16% in the second quarter and
(AAPL), Berkshire’s largest holding, fell more than 20%.
Changes in the value of the portfolio are factored into Berkshire’s earnings based on accounting rules that Buffett has said give a misleading picture of the company’s financial health. He told investors to focus on operating income, excluding changes in the value of the stock portfolio. Given the stock market rally in the current quarter, Berkshire’s third-quarter earnings should be on a good footing.
Berkshire slowed down its stock buying significantly in the second quarter after a bout of buying in the first quarter when the company bought $51 billion in stock and $41 billion after the sale. Second-quarter purchases were $6 billion and revenue was about $2 billion, according to Berkshire 10-Q regulatory filings released alongside earnings this morning.
Berkshire has added a bit to its stake in
in the second quarter, based on Barron’s 10-Q analysis. We calculate that Berkshire bought about four million shares of
during this period, raised its shares to 915 million shares valued at $125.1 billion as of June 30. The company purchased approximately five million shares of
raised its stake to 164 million shares worth $23.7 billion on June 30.
Barron’s estimates that Berkshire’s acquisition in July was quite modest, at about $500 million. We make this calculation based on a comparison of the number of outstanding shares listed for the 10 Q as of July 26 with the number of shares as of June 30.
Berkshire’s strong after-tax operating profit this quarter was driven by a nearly 10 percent increase in Burlington Northern Santa Fe railroad earnings to $1.7 billion and a 54 percent increase in insurance profits to 581. million dollars.
Investment income rose 56% to $1.9 billion, reflecting higher dividend income and higher interest rates. Berkshire is now generating more income thanks to its huge pile of cash and equivalents, thanks to moves by the Federal Reserve to raise short-term interest rates. Berkshire’s total cash and equivalents totaled $105 billion on June 30, little changed from $106 billion on June 30.
Berkshire keeps most of its cash — about $74 billion — in U.S. Treasury bills. Berkshire recorded $1.1 billion in net income for the second quarter as the dollar appreciated, which effectively reduced the value of its dollar-denominated liabilities. For example, Berkshire has yen debt to hedge currency exposure on investments in Japanese stocks. Berkshire’s earnings per share remained topped consensus estimates when that foreign exchange factor was omitted from the results.
Berkshire’s book value is approximately $314,000 per Class A share as of June 30, Barron’s estimated, down from $345,000 on March 31, reflecting a decline in the equity portfolio. The June estimate is in line with that of Edward Jones analyst James Shanahan.
According to Shanahan, investors are more focused on current book value, which could have bounced back to around $342,000 per share, based on the momentum of stocks, especially Apple, and earnings forecasts. current quarter. Berkshire stock currently trades at 1.3 times current book value, 1.4 times below the average in recent years.
Many Berkshire holders view the current valuation as attractive, given the company’s growing earnings strength and increased investment activity this year. Berkshire has amassed an $11 billion stake in Occidental Petroleum, among other notable investments. Berkshire holders want to see the company more aggressive in buying back shares based on current valuations.
Write to Andrew Barry at [email protected]