Berkshire Hathaway Q3: Revenue Beats Forecasts as Operating Profit Slips

Berkshire Hathaway reported third-quarter results on Saturday, and the picture is mixed. Revenue came in at $105.6B against a consensus estimate of $100.93B, yet profit from the underlying businesses went down. For traders, the report matters because it lands over the weekend, so the first market reaction will come when US stocks reopen.

Key takeaways

• Revenue beat: quarterly sales topped the analyst consensus, according to Investing.com.
• Operating profit fell: operating earnings dropped to $12.7 billion, a 5.8% decline from a year earlier.
• Record buyback: Berkshire bought back about $9.6 billion of its own shares, the most it has ever spent in a single quarter.
• Cash pile grew: cash totalled $377.4 billion at the end of September.

What the numbers show

The Investing.com headline describes an earnings beat, but the details are less clear. Its own text says third-quarter EPS of $15 was $7.00 worse than the analyst estimate of $8, which contradicts the headline. The figures also look like they are on a different scale from Berkshire's per-share numbers, since the company's own release reports net earnings per average equivalent Class A share of $15,502. Treat the automated EPS comparison with caution and rely on the company's release.

The company's release shows net profit attributable to shareholders of $22.112 billion, compared with $30.796 billion a year earlier. Much of that gap comes from investment gains. Berkshire itself warns that investment gains and losses in any given quarter are usually meaningless as a guide to per-share results, which is why it directs attention to operating earnings.

Why operating earnings slipped

Insurance pulled the total down, through smaller underwriting profits and lower interest income on the company's large Treasury bill holdings. Other areas were stronger: railroad, energy and manufacturing, service and retailing earnings increased. Lower interest rates on cash and weaker insurance results are the main themes investors will likely focus on.

Market context

Berkshire's class B shares, BRK-B, were at 570.89 in the latest snapshot, down 0.25% on the day, with a day range of 559.61 to 575.11. Because the report came out on a Saturday, that session reflects trading before the results were public. Other large US names moved differently: Microsoft was down 0.99% at 530.61, while Tesla was up 4.23% at 358.22 and Taiwan Semiconductor gained 6.33% to 375.44.

In currencies, the US dollar was broadly firmer, with USD/JPY at 158.425 and USD/CAD at 1.41280, while EUR/USD stood at 1.11430, down 0.67%. Bitcoin was little changed at 75,900.00, up 0.04%.

What to watch next

• How BRK-B and BRK-A trade when US markets reopen, and whether the revenue beat or the profit decline gets more attention.
• Whether buybacks stay at this pace. Berkshire has said it gives no earnings guidance, so investors have to read the quarterly filings closely.
• Signs of recovery in insurance underwriting, the area that weighed most on the quarter.
• The size of the cash pile, which keeps growing and gives the company flexibility.

Markets are volatile and prices can move quickly, so this article is for education only and is not investment advice.