Operating earnings climbed 7% with insurance gains offsetting railroad decline
Omaha, NE — Warren Buffett’s Berkshire Hathaway on Saturday reported higher second quarter earnings, boosted by strong gains in its insurance units and its massive investment in Apple stock. But operating profits for its railroad declined.
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The Oracle of Omaha’s conglomerate posted operating earnings of $10.04 billion, up 7% vs. a year earlier. Revenue climbed 21% to $92.5 billion. Analysts expected Berkshire Hathaway earnings to fall 8% to $3.87 a share, with revenue rising nearly 6% to $80.58 billion.
“Our operating businesses generally performed well during the quarter, and the stock market provided a further boost,” said Buffett in a statement.
Insurance underwriting profit surged 74% amid lower catastrophe losses while investment income also increased solidly. However, railroad operating profit fell 24% as higher fuel costs ate into profits at BNSF.
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The company posted a net profit of $35.91 billion compared to a net loss of $43.62 billion a year ago thanks to unrealized investment gains. Berkshire holds a massive $356 billion equity portfolio with sizable stakes in Apple, Bank of America, Coca-Cola and other blue chips.
Apple stock accounts for nearly 50% of Berkshire’s portfolio. Shares of the tech titan have climbed over 40% in 2022, adding billions in unrealized gains. An unrealized gain of $26 billion in Q2 came primarily from Berkshire’s Apple holdings.
Berkshire’s cash pile grew to a record $147.38 billion, up from $130.62 billion last quarter as Buffett sold nearly $8 billion in stocks. The legendary investor has struggled to find attractive acquisition targets lately, opting to return cash to shareholders through buybacks. Berkshire repurchased just $1.4 billion of its shares in Q2, down from $4.4 billion in Q1.
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“I don’t think anybody could manage $100 billion and make it worthwhile,” said Buffett about the cash in a CNBC interview. “My preference would be to have $30 billion, or something like that, and earn a decent return on it.”
With Treasury yields above 5%, Buffett has plowed cash into short-term government securities while trimming stock holdings. Berkshire sold nearly $11 billion in equities in the first half of 2022. But the investor recently expressed confidence in U.S. Treasurys after Fitch downgraded America’s credit rating.
Berkshire’s strong insurance operations, ownership of BNSF railroad and dozens of diverse businesses ranging from utilities to manufacturing have helped Buffett compile one of the greatest long-term track records. Berkshire Hathaway stock is up nearly 18% year to date, outperforming the S&P 500.