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Berkshire Hathaway Earnings: Acquisitions and Investment Portfolio Gains Boost Overall Results

We expect to leave our fair value estimate in place.

Berkshire Hathaway logo on cellphone.
Securities In This Article
Berkshire Hathaway Inc Class A
(BRK.A)
Berkshire Hathaway Inc Class B
(BRK.B)

With wide-moat Berkshire Hathaway reporting second-quarter results that were in line with our expectations, we expect to leave our $555,000 ($370) per Class A (B) share fair value estimate in place.

Second-quarter (first-half) reported revenue, which includes unrealized and realized gains/losses from Berkshire’s investment portfolios, increased to $125.6 billion ($245.7 billion) from $9.3 billion ($78.1 billion) in the year-ago period(s). Excluding the impact of investment gains/losses and other adjustments, second-quarter (first-half) operating revenue increased 21.5% (21.0%) to $92.5 billion ($178.0 billion), with much of that gain coming from the Alleghany acquisition and the onboarding of operating results from Pilot Travel Centers (in January 2023).

Operating earnings, exclusive of investment gains/losses, increased 6.6% (9.2%) year over year to $10.0 billion ($18.1 billion) during the June quarter (first half of the year), with most of the company’s segments posting solid operating earnings growth (with insurance getting a big boost from the Alleghany deal) except for BNSF, which posted a large operating earnings decline. When including the impact of the investment gains/losses, reported operating earnings increased to $35.9 billion ($71.4 billion) from negative $43.6 billion (negative $38.0 billion) in the prior year’s period(s).

Book value per share, which still serves as a decent proxy for measuring changes in Berkshire’s intrinsic value, increased 6.4% sequentially to $372,966 from $350,405 at the end of March 2023, slightly above our internal forecast of $3372,481. The company closed out the second quarter with $147.4 billion in cash and cash equivalents, up from $130.6 billion at the end of March 2023, as unutilized free cash flow, along with net stock sales of $6.6 billion, kept the firm from reducing cash balances. By our estimates, Berkshire came into the third quarter with $106.9 billion in dry powder.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Greggory Warren, CFA

Strategist
More from Author

Greggory Warren, CFA, is a strategist, AM Financial Services, for Morningstar*. He covers the traditional US- and Canadian-based traditional asset managers, as well as the alternative asset managers and Berkshire Hathaway. Over the course of his career, Warren has covered not only financial services names but companies from the consumer staples and consumer cyclicals sectors, and been involved in portfolio stock selection and management.

Prior to joining Morningstar in 2005, Warren worked as a buy-side equity analyst for more than eight years, covering consumer staples and consumer cyclicals. Before assuming his current role at Morningstar in 2017, Warren covered the financial-services sector as a senior analyst since late 2008. Prior to that time, he covered the non-alcoholic beverage manufacturers and distributors, packaged food firms, food service distributors, and tobacco companies.

Warren holds a bachelor's degree in accounting and English from Augustana College. He also holds the Chartered Financial Analyst® designation and is a member of the CFA Society of Chicago.

During 2014-19, Warren was selected to participate each year on the analyst panel at Berkshire Hathaway’s annual meeting, asking questions directly of Warren Buffett and Charlie Munger. The analyst panel was disbanded ahead of Berkshire’s 2020 annual meeting. Warren also ranked second in the investment services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey in 2013, the last year the survey was conducted.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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