Profits soar 82% at Warren Buffett’s Berkshire Hathaway, but pandemic hurts business

Berkshire BRK.B,
+ 0.67%

BRK.A,
+ 0.62%
Saturday said it earned $ 30.1 billion, or $ 18,994 per Class A share, during the quarter. It increased from $ 16.5 billion, or $ 10,119 per Class A share, a year ago. Most of the gains were due to a $ 24.8 billion improvement in the estimated value of Berkshire’s investments, which include large holdings in Apple and Bank of America.

Buffett argues that Berkshire’s operating earnings offer a better view of quarterly performance because they exclude investments and derivatives, which can vary widely. Under this measure, Berkshire’s operating earnings fell 32%, to $ 5.49 billion, or $ 3,452.45 per Class A share. It fell from $ 8.07 billion, or $ 4,943.04 per share. Class A share, one year earlier.

The four analysts interviewed by FactSet had expected Berkshire to report a Class A operating earnings per share of $ 3,587.63.

Berkshire said its revenue was down 3% for the quarter, to $ 63.02 billion. Edward Jones analyst Jim Shanahan said it was impressive to see Berkshire’s revenues remain close to last year’s level given all the challenges facing the economy at large.

“I think you would struggle to find many companies reporting only a modest decline in revenue,” said Shanahan.

BNSF said profits fell 8%, to $ 1.35 billion, on the railroad as the coronavirus continued to slow freight traffic. Berkshire said the railroad delivered 8% fewer freight during the quarter, which is better than the second quarter, when volume fell 18% at the height of virus-related business disruptions, but still significantly lower than last year.

The Berkshire utility unit was a bright spot in the report with $ 1.395 billion in profits, up 18% from last year. Utilities have been aided by increased tax credits for wind energy and other upcoming renewable energy projects.

Berkshire said its aircraft components company Precision Castparts continued to struggle with the impact of the pandemic on aviation, as it reported an 80% drop in its pre-tax earnings. Precision, which suffered a $ 10 billion devaluation in the second quarter, said it plans to cut 40% of its workforce by the end of the year.

Berkshire said it spent $ 9 billion to buy back its stock during the third quarter, which is nearly double the record $ 5.1 billion it spent buying its stock in the second quarter. But even after the buybacks and a handful of investments made by Berkshire during the quarter, the company still held $ 145.7 billion in cash and short-term investments at the end of the third quarter.

Berkshire continued to hold a huge amount of cash despite buying about $ 2.1 billion of Bank of America stock over the summer and agreeing to pay $ 4 billion for the pipeline and storage business. by Dominion Energy. Berkshire did not conclude the first part of the deal with the Dominion until earlier this month.

Berkshire also said in August that it had taken stakes of just over 5% in five major Japanese trading companies, but that about $ 6 billion of investment was made gradually over the previous year, so it didn’t have much impact on the liquidity of Berkshire in the third quarter.

Berkshire owns more than 90 companies, including Geico’s insurance and utilities, furniture, manufacturing and jewelry firms. The Omaha, Nebraska-based conglomerate also has major investments in companies such as American Express, Moody’s and Coca-Cola.