Berkshire Hathaway Reports Surge in Third-Quarter Earnings and Record Cash Holdings
OMAHA, Nebraska – Berkshire Hathaway, led by CEO Warren Buffett, announced a significant increase in third-quarter operating earnings, while also revealing a record amount of cash reserves due to a lack of dealmaking opportunities.
The conglomerate’s operating earnings for the quarter reached $10.761 billion, a substantial 40.6% rise from the same period last year when it earned $7.651 billion. These earnings reflect the profits generated by Berkshire Hathaway’s vast array of wholly owned businesses, including insurance, railroads, and utilities.
At the end of September, Berkshire Hathaway held a record-breaking $157.2 billion in cash reserves, surpassing the previous high of $149.2 billion set in the third quarter of 2021. Buffett has been capitalizing on surging bond yields by investing in short-term Treasury bills with yields of at least 5%. The conglomerate’s investments in such Treasury bills stood at $126.4 billion by the end of the third quarter, compared to roughly $93 billion at the end of last year.
During the third quarter, Berkshire Hathaway continued its share buyback activity, albeit at a slower pace. The company spent $1.1 billion repurchasing its shares, bringing the total repurchases for the nine-month period to approximately $7 billion. Despite this, Berkshire Hathaway Class A shares saw a rally of nearly 14% this year. Although they reached an all-time high on September 19, the shares have since experienced a 6% decline from the peak.
Geico, Berkshire’s prized insurance subsidiary fondly referred to as Buffett’s “favorite child,” reported yet another profitable quarter with underwriting earnings amounting to $1.1 billion. However, BNSF, the conglomerate’s railroad division, faced a 15% decline in earnings due to lower volumes and higher costs.
Buffett’s company did incur a significant investment loss of $24.1 billion in the third quarter, primarily stemming from a decline in its substantial stake in Apple. Apple’s shares dropped 11.7% during the quarter but have since rebounded by over 3%.
Berkshire Hathaway urged investors to focus on its long-term performance rather than the quarterly fluctuations in its equity portfolio. The company stated in a statement, “The amount of investment gains/losses in any given quarter is usually meaningless and delivers figures for net earnings (losses) per share that can be extremely misleading to investors who have little or no knowledge of accounting rules.”
Moreover, while Berkshire Hathaway showcased impressive operating earnings, it acknowledged the negative economic impact of the ongoing pandemic, as well as geopolitical risks and inflation pressures. The conglomerate stated, “To varying degrees, our operating businesses have been impacted by government and private sector actions to mitigate the adverse economic effects of the COVID-19 virus and its variants as well as by the development of geopolitical conflicts, supply chain disruptions, and government actions to slow inflation. The economic effects from these events over longer terms cannot be reasonably estimated at this time.”
Despite these challenges, Berkshire Hathaway remains optimistic about its long-term prospects and its ability to navigate the ever-changing economic landscape.