Berkshire started buying back its own shares in the first quarter for the first time in more than a year. Earlier this year, Abel said Berkshire was restarting buybacks because executives found the “intrinsic value” of those shares exceeded their market price.
“People are going to be encouraged by the buybacks,” said Cathy Seifert, an analyst for CFRA Research. “It’s also Greg’s way of taking the helm and asserting himself.”
The stock buybacks provided shareholders with their largest quarterly payout since 2021. The firm’s cash hoard fell to $365.5 billion in the second quarter, down from roughly $397 billion in the prior period.
Operating earnings climbed 16% in the three months through June to nearly $13 billion, driven in part by gains in the conglomerate’s manufacturing, service and retailing division, as well as at its utilities business, the Omaha, Nebraska-based company said Saturday in a statement.
Berkshire’s earnings are typically closely watched because its businesses — ranging from insurance to railroads to energy and manufacturing — provide a snapshot of the health of the US economy.
After years of relatively quiet deal activity under Warren Buffett, who often complained of high market valuations, his successor sealed back-to-back multibillion-dollar transactions.The newly minted CEO spent $6.8 billion to buy homebuilder Taylor Morrison Home Corp., a typical value bet, while also handing $10 billion to Google parent Alphabet Inc. to support its investments related to artificial intelligence, a new area for the conglomerate.
The deal puts Alphabet among Berkshire’s top five holdings at the end of the quarter, replacing Chevron Corp. The Taylor Morrison transaction closed in the third quarter.
Halfway through his first year at the helm of Berkshire Hathaway, Abel has been praised by shareholders for his leadership.
Still, Berkshire’s Class B shares rose 3.8% this year as of market close Friday, compared with a roughly 13% gain for the S&P 500 — a benchmark that Buffett himself frequently cited.
Operational Improvements
Net income at Berkshire’s railroad unit BNSF rose 6.3% to about $1.6 billion amid higher shipping volumes, despite higher fuel costs. BNSF CEO Katie Farmer has been charged with improving the unit’s operating margin and closing the gap with its most efficient peers.
Geico, the main contributor to Berkshire’s insurance results, posted pretax underwriting earnings that fell by 45%, to $994 million, in the second quarter amid higher losses and an increase in commissions and advertising expenses.
“This is in sharp contrast to what we’re seeing at some other underwriters” that are struggling with sales because of competition but still reporting “some really strong underwriting profits,” Seifert said.
The decline more than offset gains at Berkshire’s other primary insurance and reinsurance businesses, resulting in a 13% decline in net underwriting income for the entire insurance group to $1.7 billion.
Over the period, net income at the conglomerate’s collection of manufacturing, service and retailing units jumped 24% to $4.5 billion, while profits at Berkshire’s utilities business surged 27%, to $891 million.
