HomeBusinessBerkshire posts record operating...

Berkshire posts record operating profit as rising rates boost Buffett’s returns


Aug 5 (Reuters) – Berkshire Hathaway (BRKa.N) on Saturday posted its highest ever quarterly operating profit, while gains from stock holdings helped the conglomerate led by billionaire Warren Buffett swing to a nearly $36 billion overall profit.

Rising interest rates, and better results at the Geico car insurer, allowed Berkshire’s insurance businesses to generate more money in the second quarter, with profit up 38% and interest and other investment income growing sixfold.

But while operating profit topped $10 billion, those same rising rates have made it more costly to buy and upgrade homes, hurting results at Berkshire’s Clayton Homes and building products businesses, and buy RVs from its Forest River unit, where revenue sank 34%.

Profit also fell at one of Berkshire’s largest businesses, the BNSF railroad, with a 24% decline reflecting lower shipments of consumer goods, price competition from truckers, and higher pay for employees.

Berkshire also appeared to remain wary of high stock prices as U.S. equities extended their rally.

During the second quarter it sold $8 billion more stocks than it bought and repurchased less of its own stock, and it ended June with a near-record $147.4 billion of cash.

“The story here is interest rates, and valuations of stocks,” said Jim Shanahan, an Edward Jones analyst with a “buy” rating on Berkshire.

“The earnings impact of higher interest rates on investment income is offsetting the economic softness caused by those same rates,” he added. “And it’s clear there aren’t a lot of attractive investment opportunities out there.”

Investors closely watch Berkshire because of Buffett’s reputation, and because results from the Omaha, Nebraska-based company’s operating units often mirror broader economic trends.

Those units also include Berkshire’s namesake energy company, several industrial companies, and familiar brands such as Dairy Queen, Duracell, Fruit of the Loom and See’s Candies.

Buffett turns 93 on August 30. He is worth $117.5 billion and the world’s sixth-richest person, Forbes magazine said.

NOT LOVING VALUATIONS

Quarterly operating profit rose 7% to $10.04 billion, or about $6,938 per Class A share, from $9.42 billion a year earlier.

Operating results reflected recent purchases of Alleghany, whose businesses include various insurers and the toy company that makes Squishmallows, and the Pilot truck stop operator, which added $114 million of profit.

Net income totaled $35.91 billion, or $24,775 per Class A share, compared with a year-earlier $43.62 billion loss.

Year-earlier results reflected an accounting change for some insurance contracts.

Berkshire repurchased $1.4 billion of stock in the quarter, down from $4.4 billion from January to March.

It also sold $12.6 billion of stocks, while buying just $4.6 billion. Apple (AAPL.O) comprised about half of Berkshire’s $353 billion equity portfolio.

“They’re not loving valuations,” said Cathy Seifert, a CFRA Research analyst with a “hold” rating on Berkshire.

“The quarter was strong, but organic growth trends are not that robust,” Seifert added. “The question that will be on investors’ minds is how to position the company for strong growth without more frequent acquisitions.”

Net results included $25.9 billion of largely unrealized gains from investments and derivatives, which accounting rules require Berkshire to report. This adds volatility to quarterly results, and Buffett urges investors to ignore the fluctuations.

WILDFIRE LOSSES

Geico posted a $514 million pre-tax underwriting profit, its second straight profitable quarter after six quarters of losses, as higher average premiums, fewer accidents and less ad spending offset a decline in policies-in-force.

Overall profit from Berkshire Hathaway Energy, where Berkshire has a 92% stake, was little changed at $785 million.

But the company said it faces a potential $1.02 billion of pre-tax losses, or $608 million not covered by insurance, at its PacifiCorp electric utility unit tied to a series of Oregon wildfires in 2020.

An Oregon jury in June found PacifiCorp liable to homeowners for negligence after failing to shut down power lines that caused four fires. PacifiCorp plans an appeal.

Results also included profit attributable to Berkshire’s 25.3% stake in Occidental Petroleum (OXY.N).

Berkshire also owns $8.8 billion of Occidental preferred stock, which throws off an 8% dividend, though the oil company has redeemed some of the original $10 billion it issued.

The Class A shares of Berkshire closed Friday at $533,600, about 2% below their record high. They are up 14% this year, while the Standard & Poor’s 500 (.SPX) has risen 17%.

Reporting by Jonathan Stempel in New York; Editing by Ira Iosebashvili, Angus MacSwan, Jan Harvey, Alistair Bell and Diane Craft

Our Standards: The Thomson Reuters Trust Principles.



Source link

Most Popular

LEAVE A REPLY

Please enter your comment!
Please enter your name here

More from Author

Read Now

Team India Squad for T20 World Cup 2024 Announced: Here’s India’s official team for T20 WC – Republic World

India T20 World Cup squad announcement | Image:APTeam India's squad for the upcoming ICC T20 World Cup 2024 has been announced. On Tuesday, the selection committee led by chief selector Ajit Agarkar convened in Ahmedabad and zeroed in on a 15-member unit, which they deem is the...

Justice Minallah says state has to protect judges, independence of judiciary

Justice Athar Minallah on Tuesday said the state had to protect the judges and the judiciary’s independence as the Supreme Court took up a suo motu case pertaining to allegations of interference in judicial affairs.A six-member bench resumed...

Stock futures slip slightly as investors look ahead to Fed decision, megacap earnings: Live updates

Traders work on the floor of the New York Stock Exchange during morning trading on February 29, 2024 in New York City. Michael M. Santiago | Getty ImagesU.S. stock futures fell slightly Tuesday morning after a positive start to the week, as investors brace for megacap earnings,...

Europe’s Economic Laggards Have Become Its Leaders

Something extraordinary is happening to the European economy: Southern nations that nearly broke up the euro currency bloc during the financial crisis in 2012 are growing faster than Germany and other big countries that have long served as the region’s growth engines.The dynamic is bolstering the...

Trump’s Plans for the Fed Make No Sense, Even for Him

A second Trump administration might be very different from the first, and that includes how the president treats the Fed. Donald Trump complained a lot about the US Federal Reserve when he was president, jawboning for lower interest rates and questioning its competence. Yet at the...

Police to launch raids to find migrants to deport to Rwanda, Cabinet Minister claims

Police will mount raids to find missing migrants so they can be deported to Rwanda, a Cabinet minister has said.Health Secretary Victoria Atkins was commenting on reports that the Home Office has lost contact with thousands of people who are set to be removed from the...

The French #Metoo Scandal Unraveling in Weinstein’s Shadow

French actor Gérard Depardieu was ordered to stand trial for allegedly sexually assaulting two women on a film set three years ago, marking the latest legal escalation for the 75-year-old movie star who has become a central figure in France’s #MeToo movement.The announcement coincides with a...

Hong Kong Bitcoin and Ether ETFs Have Soft Debut

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired...

Customization Overview | Halo Infinite CU32

Operation: Banished Honor arrives on April 30 and you’re gonna want to look the part! After all, the Banished welcome all who pledge their service to Atriox, and your new allegiance and mindset demands a new outfit, so let’s find out more about the customization that...

T20 World Cup 2024 Squads: From India To Australia, Check Here Team-Wise Full Players List, Venues, Fixture, Timings And More

ICC T20 World Cup 2024 Cricket Matches Full Schedule: The T20 World Cup 2024 promises to be an exhilarating showcase of cricketing talent from around the globe. With teams from various nations competing for the prestigious title, fans can expect intense matches filled with thrilling moments...

How the Twins’ summer sausage celebration got made: It sparked the offense, but should they eat it?

CHICAGO — With Abe Froman unavailable, I called sausage expert Elias Cairo to address Rocco Baldelli’s concerns about a potentially hazardous pre-encased meat currently residing in the Minnesota Twins clubhouse.Nearly a week after it arrived and with the package showing visible signs of wear, tear and...