Buffett has long said Berkshire's operating earnings offer a better view of quarterly performance because they exclude investments and derivatives, which can vary.
Warren Buffett’s company reported Saturday that it saw an 11 per cent decline in third-quarter profits because of a smaller increase in the paper value of its investments, even as it sits on a mountain of cash. Berkshire Hathaway said it made USD 16.52 billion, or USD 10,119 per Class A share, in the quarter, down from USD 18.54 billion, or USD 11,280 per Class A share, a year ago.
Buffett has long said Berkshire’s operating earnings offer a better view of quarterly performance because they exclude investments and derivatives, which can vary. By that measure, Berkshire’s operating earnings improved to USD 7.86 billion, or USD 4,812 per Class A share, from USD 6.88 billion, or USD 4,186.05 per Class A share.
Analysts surveyed by FactSet expected operating earnings per share of USD 4,299.20 on average. Berkshire Hathaway recorded a USD 8.67 billion paper investment gain during the quarter. A year ago, it registered an unrealised USD 11.66 billion investment gain. Berkshire’s revenue improved 2 per cent to USD 64.97 billion.
Edward Jones analyst Jim Shanahan said the results look good overall despite the ongoing challenges of the US trade war with China and weakness in manufacturing, but it’s disappointing that Berkshire didn’t find a way to use more of its cash. Berkshire is sitting on a pile of more than USD 128 billion cash because Buffett has struggled to find major acquisitions for the company recently. Buffett said Berkshire repurchased about USD 700 million of its shares during the quarter. “Whenever this market pulls back meaningfully, they’ll have a lot of capacity to put cash to work,” Shanahan said.
Berkshire said its BNSF railroad added USD 1.466 billion net income during the quarter, up from USD 1.393 billion a year ago, as it reduced costs as volume slowed. Berkshire’s utilities generated USD 1.18 billion net income, up from USD 1.09 billion a year ago. The company’s insurance units, which include Geico, generated USD 1.48 billion in investment income, up from USD 1.24 billion a year ago.
Berkshire Hathaway Inc. owns more than 90 companies, including BNSF railroad and clothing, furniture and jewellery businesses. Its insurance and utility businesses typically account for more than half of the company’s operating income. The company also has major investments in such companies as Apple, American Express, Coca-Cola and Wells Fargo & Co.