Berkshire more than doubles share buybacks as revenue and earnings decline

[Financial News]  

Berkshire Hathaway said in its third-quarter earnings announcement on the 7th (local time) that it was accelerating its share buybacks as revenue and operating profit came under pressure.
Meanwhile, the value of Berkshire’s stakes in Apple and Coca-Cola was found to have risen substantially.

Berkshire, where Greg Abel took over as CEO from “the Sage of Omaha” Warren Buffett early this year, said it bought $9.6 billion worth of its own shares in the third quarter. That was more than twice the $4.5 billion it bought in the second quarter. Berkshire has thus bought back about $14.4 billion worth of its own shares so far this year.
The large-scale share buybacks took place as Berkshire’s core business contracted.
According to CNBC, operating profit at Berkshire’s subsidiaries fell 5.8% to $12.705 billion in the third quarter, from $13.485 billion in the same period last year.
Insurance underwriting (revenue) plunged 43% year over year to $1.352 billion, while income from insurance investments fell 14% to $2.734 billion.
By contrast, net income increased across all three sectors: railroads, energy and manufacturing.
Overall net income, including massive gains in the value of its stock portfolio, plunged 28% to $22.112 billion from $30.796 billion a year earlier. Investment income nearly halved, to $9.407 billion.

Despite the earnings deterioration, Berkshire shares have been rising even as technology stocks have faced selling pressure in recent market trading. Berkshire Class A shares, among the New York market’s highest-priced stocks, closed at $856,612.00 on the 6th, up 12% over the past month. That contrasts with a 5.5% decline in the S&P 500, the index that best reflects overall market performance, over the same period. For the year as a whole, Berkshire has risen 13% while the S&P 500 has gained 7.8%.

The top five stocks in Berkshire’s third-quarter equity portfolio were unchanged from before: Apple, Alphabet, American Express, Coca-Cola and Bank of America (BofA).
Among them, the value of Berkshire’s stake in Alphabet fell 3.7% in the third quarter and 9% for the year as a whole. American Express declined 10.1% and 13.2%, respectively, while BofA was down 4.5% and 10.1%.
By contrast, Apple and Coca-Cola performed well as concerns about investment in artificial intelligence (AI) mounted and the market saw a rotation out of technology stocks and into value stocks.
The value of Berkshire’s stake in Apple rose 15.1% in the third quarter and 25.9% for the year as a whole. Coca-Cola’s valuation rose a modest 5.9% in the third quarter but surged 36.8% for the year as a whole.
Berkshire’s cash holdings in the third quarter stood at $377.435 billion, up 3% from $365.514 billion in the second quarter. But after subtracting outstanding payments for purchases of railroads, utilities and short-term U.S. Treasury bills (T-bills)—funds that are effectively tied up—the cash actually available for deployment was $352.3 billion, down 1.9% from the previous quarter.

[email protected] Song Kyung-jae Reporter