Warren Buffett’s conglomerate reported an 82 percent jump in its third-quarter profit as the value of its investment portfolio soared, but Berkshire Hathaway said the COVID-19 pandemic continued to hurt its assorted businesses, such as BNSF railroad.
Berkshire said that it earned US$30.1 billion, or US$18,994 per Class A share, during the quarter. That is up from US$16.5 billion, or US$10,119 per Class A share, a year ago.
Most of the gains were due to a US$24.8 billion improvement in the estimated value of Berkshire’s investments, which include large stakes in Apple Inc and Bank of America.
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Buffett maintains that Berkshire’s operating earnings offer a better view of quarterly performance because they exclude investments and derivatives, which can vary widely.
By that measure, Berkshire’s operating earnings declined by 32 percent, to US$5.49 billion, or US$3,452.45 per Class A share. That is down from US$8.07 billion, or US$4,943.04 per Class A share, a year earlier.
The four analysts surveyed by FactSet expected Berkshire to report operating earnings per Class A share of US$3,587.63.
Berkshire said its revenue slipped by 3 percent in the quarter, to US$63.02 billion.
Edward Jones analyst Jim Shanahan said it was impressive to see Berkshire’s revenue remain close to last year’s level given all the challenges in the overall economy.
“I think you’d struggle to find many, if any, companies that are reporting only modest declines in revenues,” Shanahan said.
BNSF said profit fell by 8 percent, to US$1.35 billion, at the railroad as the coronavirus continued to slow freight traffic.
Berkshire said the railroad delivered 8 percent less freight during the quarter, which is better than the second quarter, when volume fell by 18 percent at the height of the virus-related business shutdowns, but still significantly lower than last year.
Berkshire’s utility unit was a bright spot in the report with US$1.395 billion in profits, up 18 percent from last year.
The utilities were helped by higher tax credits for wind energy and other renewable power projects coming online.
Berkshire said its Precision Castparts aircraft parts manufacturing company continued to struggle with the pandemic’s impact on aviation, as it reported an 80 percent drop in its pretax earnings.
Precision, which took a US$10 billion writedown in the second quarter, said it expected to cut 40 percent of its workforce by the end of the year.
Berkshire said it spent US$9 billion repurchasing its own shares during the third quarter, which is nearly double the record US$5.1 billion it spent buying its own stock in the second quarter
However, even after the repurchases and a handful of investments Berkshire made during the quarter, the company still held US$145.7 billion in cash and short-term investments at the end of the third quarter.
Berkshire continued to hold a massive amount of cash despite buying about US$2.1 billion in Bank of America stock during the summer and agreeing to pay US$4 billion for Dominion Energy Inc’s natural gas pipeline and storage business.
Berkshire did not close on the first part of the Dominion deal until earlier this month.
Berkshire also said in August that it had taken stakes of just over 5 percent in five major Japanese trading houses, but that about US$6 billion investment was made gradually over the previous year, so it also did not have a big impact on Berkshire’s cash in the third quarter.
However, the pandemic, two hurricanes and low interest rates hurt profit from insurance businesses, which include the Geico Corp auto insurer.
Geico awarded drivers US$2.5 billion of credits on policy renewals this year, and Berkshire said its accounting for those credits should hurt underwriting results through March.
Additional reporting by Reuters
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