Achi news desk-
The conglomerate has just reported its first quarter results, so here’s a breakdown of the key figures.
Berkshire Hathaway (BRK.A -0.56%) (BRK.B 0.07%) first quarter results were reported on Saturday, and there’s a lot to unpack. In addition to the headline revenue and earnings numbers, investors are always watching Berkshire’s cash pile, buyback activity, and the operating income from its subsidiaries.
With that in mind, here’s a breakdown of the key numbers, a major investment move revealed, and the important information we don’t know yet
The main numbers (which don’t mean much)
Warren Buffett himself has warned investors not to pay too much attention to the company’s net income (earnings per share, or EPS), as it includes unrealized investment gains and losses from Berkshire’s massive stock portfolio. That’s especially true for the first quarter, like excellent the first quarter of 2023 resulted in an EPS decline of 64% – although Berkshire’s business performed quite well, as we will see in the next section.
Berkshire’s revenue grew 5%, and it’s worth noting that both the top and bottom line numbers came in significantly higher than analysts had been expecting.
Operating earnings paint a better picture
Berkshire’s operating earnings tell us how the company’s subsidiary businesses are performing, and these look great. Overall, Berkshire’s operating earnings grew 39% year over year.
Much of this strong performance was due to the insurance business. Securities income nearly tripled year over year, and investment income increased by 32%, largely due to the rising interest rate environment over the past year. Berkshire Hathaway Energy’s operating earnings rose 72% year over year. The only significant decline was an 8% year-over-year decline in BNSF Railroad’s operating earnings, but the rest of Berkshire’s business more than made up for it.
Is Buffett sour on Apple?
One of the most important things investors should know about Berkshire Hathaway’s quarterly reports is what I am not revelation.
In particular, although Berkshire reports the cost basis of its huge stock portfolio from quarter to quarter, we generally don’t know what stocks Berkshire bought or sold (with a few exceptions) until its 13-F is filed with the Securities and Exchange Commission. This quarter’s filing is due on May 15, so we’ll get an updated snapshot of Berkshire’s portfolio as it stood on March 31.
However, Berkshire reports the market value of its largest stock positions at the end of the quarter. Judging by these, it appears that Berkshire has unloaded around 13% of its huge investment in Apple (AAPL 5.98%) during the first quarter. This would certainly explain the rapid growth in the cash stockpile, as well as the realize investment gains of $11.2 billion that Berkshire mentioned in its earnings statement.
Purchases accelerated back in the first quarter
Berkshire’s buyback activity is always of interest to shareholders, as it provides insight into whether Buffett thinks the company’s stock is attractive. Although a price below intrinsic value ​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​​ is a requirement for any buyback, the pace of buybacks has varied greatly over the past few years.
The first quarter earnings report shows that Berkshire spent $2.6 billion on buybacks, including Class A and Class B shares.
For context, Berkshire repurchased $2.2 billion of its shares in the fourth quarter of 2023 and spent $9.2 billion throughout last year. So, the first quarter represents a slight acceleration.
Berkshire’s cash hoard reaches a new record
At the end of 2023, Berkshire’s cash pile increased to a record $167.6 billion. Simply put, Buffett has struggled to identify attractive acquisition opportunities in recent years, and with short-term Treasuries yielding about 5% on Berkshire’s idle cash, Buffett is in no rush to pull the trigger.
To say Berkshire’s cash hoard grew in the first quarter would be an understatement. Including cash, equivalents, and short-term Treasury Bills, Berkshire now has a whopping $189 billion on its balance sheet.
Finally, the earnings report was released on the morning of Berkshire’s widely followed annual shareholder meeting in Omaha, Nebraska. The meeting includes hours of Q&A with Warren Buffett and the heads of Berkshire’s insurance and non-insurance operations, so there will likely be some new information (and investment wisdom) shared throughout the day. We might even find out why Buffett sold a significant amount of Apple. We’ll be sure to let you know!
