Key Morningstar Metrics for Berkshire Hathaway

What We Thought of Berkshire Hathaway’s Earnings

With narrow-moat-rated BRK.A BRK.B reporting adjusted third-quarter operating results that were more or less in our range of expectations for the quarter, we are leaving our $700,000 ($467) per Class A (B) share fair value estimate in place for Berkshire stock.

Third-quarter revenue, including unrealized and realized gains/losses from Berkshire’s investment portfolios, increased 78.9% to $113.5 billion from $63.4 billion in the year-ago period. Excluding the impact of investment gains/losses and other adjustments, third-quarter operating revenue declined 0.2% year over year to $93.7 billion.

Operating earnings, exclusive of investment gains/losses, decreased 6.2% year over year to $10.1 billion during the September quarter as insurance underwriting results were negatively affected by both accrued losses tied to Hurricane Helene, as well as a reassessment of claims liabilities at GUARD insurance companies, during the third quarter. When including the impact of the investment gains/losses, reported operating earnings increased to $26.3 billion from negative $12.8 billion in the prior year’s period.

Book value per share, which still serves as a decent proxy for measuring changes in Berkshire’s intrinsic value, increased 6.7% sequentially and 23.0% year over year to $446,906.

This was due in a large part to improvements in the company’s insurance operations as well as its equity investment portfolio.

As for the insurance investment portfolio, Berkshire reported $4.5 billion of pre-tax investment income during the third quarter. This was up 56.6% from $2.9 billion in the year-ago period as Berkshire lifted its stake in Treasury Bills to $288.0 billion at the end of September 2024 from $126.4 billion at the end of the third quarter of 2023.

That said, the company’s stock holdings declined to $271.7 billion ($301.8 billion when including its equity method investments in Occidental Petroleum and Kraft Heinz) from $318.6 billion at the end of September 2023, owing in a large part to Berkshire cutting its stake in Apple by more than 50% and reducing its holding in Bank of America by 25% this year.

First Quarter Without Berkshire Stock Repurchases Since 2018

The company closed out the third quarter with a record $325.2 billion in cash and cash equivalents, up from $276.9 billion at the end of June 2024 (due primarily to $36.1 billion of net sales from its stock holdings as free cash flow turned negative during the quarter).

Unfortunately, Berkshire did not repurchase any shares during the third quarter, the first time that the company has not bought back stock since CEO Warren Buffett started repurchasing shares on a more regular basis in the third quarter of 2018. We were not too surprised, as the shares have hewed relatively close to our fair value estimate for much of the year and exceeded those levels in the third quarter.

Berkshire, by our estimates, had around $282.4 billion in dry powder on hand at the start of the fourth quarter of 2024 that could be committed to investments, acquisitions, and share repurchases.