Berkshire Reports Strong Earnings and Formidable Cash Stockpile

DealBook|Berkshire Reports Drop in Profits but Formidable Cash Stockpile

https://www.nytimes.com/2024/05/04/business/dealbook/berkshire-hathaway-buffett.html

The company’s first-quarter earnings were released before its annual investor meeting in Omaha.

Warren Buffett, wearing a blue blazer, white shift and gray pants and holding a cane, sits in a golf cart. There is a crowd of people behind him.
Berkshire Hathaway’s annual meeting this weekend is the first for its chief executive, Warren E. Buffett, since the death of Charles Munger, his longtime business partner and alter ego.Credit…Scott Morgan/Reuters

Michael J. de la Merced

Berkshire Hathaway on Saturday reported a sharp drop in first-quarter profits, driven largely by lower investment income, as the conglomerate’s chief executive, Warren E. Buffett, prepares to speak at its annual investor meeting.

Those results belie an increase in operating earnings, which track the actual profits that Berkshire’s array of companies produce, and in Berkshire’s formidable cash hoard — which totaled nearly $189 billion as of March 31 — that points to the company’s robust health.

The company’s latest results set a backdrop for the meeting in downtown Omaha, which will be the first for Berkshire since the death in November of Charles Munger, Mr. Buffett’s longtime business partner and alter ego, at age 99.

For the first three months of the year, Berkshire reported $12.7 billion in earnings attributable to its shareholders, down 64 percent from the same time a year ago. Driving the drop was a steep fall in the paper value of Berkshire’s vast investment portfolio though Mr. Buffett has long warned shareholders to ignore fluctuations in the company’s stock holdings.

Berkshire also disclosed that it had trimmed its huge stake in Apple, which Mr. Buffett has called one of his company’s most important holdings, by about 13 percent in the quarter. It now owns about $135.4 billion, down from $174.3 billion at the end of 2023. (Apple’s chief executive, Tim Cook, is attending the annual meeting.)

Looking at operating earnings, Mr. Buffett’s favored metric because it measures the tangible health of Berkshire’s business, the company reported a 40 percent gain, to $11.2 billion. That was propelled by a more than doubling of Berkshire’s core insurance underwriting business, as its Geico insurer charged higher premiums per policy and reported fewer claims, while its reinsurance division didn’t take any hits from catastrophes in this year’s first quarter.

Those gains offset weaker results in other parts of Mr. Buffett’s empire, including an 8 percent fall in net earnings at the BNSF railroad because of lower shipments of fuel versus consumer goods and lower fuel surcharge revenue.

Its Pilot Travel Centers chain of truck stops, which it acquired full control of in January, reported a 19 percent drop in net earnings, as the business saw lower margins on fuel sales and higher operating expenses.

And Berkshire disclosed that its PacifiCorp utility, which operates in the West, faces federal and state investigations and lawsuits over any role it played in wildfires in 2020 and 2022.

The earnings report was released ahead of the Berkshire meeting, which will see tens of thousands of Berkshire shareholders gather at the CHI Health Center arena in the company’s hometown to watch Mr. Buffett answer questions.

Among the topics that he will probably discuss — some with the help of his top lieutenants, including his likely successor, Gregory Abel — are his outlook on the economy and the November elections and where he sees investment opportunities.

Michael de la Merced joined The Times as a reporter in 2006, covering Wall Street and finance. Among his main coverage areas are mergers and acquisitions, bankruptcies and the private equity industry. More about Michael J. de la Merced

Roy Walsh

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