Berkshire Hathaway Inc. (BRK.A, Financial) (BRK.B, Financial) released its first quarter financial results which showed an increase of 20% in operating income. Net earnings reported was $5.16 billion as compared to the $4.7 billion for the same period last year. Shareholders surely have a reason to rejoice given that profit rose 10% for the quarter. Class A share value closed up $2400 to $215,800. Class B shares increased $2.15 to $143.36 on Friday trading.
Number mix
The Nebraska-based company reported a rise of 20% in operating profit. Operating profit for the quarter was $4.24 billion, or $2,583 a share, as compared to $3.53 billion, or $2,149 a share for last year. This was way above analysts’ expectations of $2,373 per class A share according to a data compiled by Thomson Reuters I/B/E/S. Berkshire Hathaway also witnessed an increase in its net income from $4.71 billion last year to $5.16 billion this quarter. On a per share basis, the net income increased to $3,143 a share from $2,862 in the previous year. Revenue of the company also rose 7% for the quarter to $48.64 billion. Analysts estimated earnings of $3.6 billion or $2,387.79 per Class A Share, according to a data compiled by FactSet. The Class A shares was flat in after hours Friday.
The company also saw a good performance division-wise. The operating earnings from the insurance underwriting unit saw an increase of 4% to $480 million. The railroad, utilities and energy divisions witnessed an increase of 24.6% of earnings to $1.466 billion. The Burlington Northern Santa Fe railroad unit’s profit increased by 44% to $1.05 billion. The main increase for such a great leap is the higher capacity coupled with up-gradations and new equipment. As part of their improvement program, the company has allocated $6 billion towards these improvements which will be used in the current year as well. Some businesses however failed to perform up to the mark. The energy business witnessed a 7% decline in profit to $421 million. General Re reinsurer also saw a decline due to cut-throat competition coupled with larger amount of claims. Geico, the insurance unit reported a 55% decline in profit. This was mainly due to greater claims which forced the company to make an increase in the premium rates. Cash holdings by the end of the quarter was $63.71 billion, which is surely a good sign.
Investors rejoice
The fifth largest public company in the world (according to the Forbes Global 2000), reported a 0.5% increase in per-share book value since the end of last year. The per-share book value is a measure of assets minus the liabilities. Diversified into various units like insurance, food, energy and other businesses, the company owns around $115 billion in stocks.
Berkshire Hathaway has never failed to give its investors a reason to rejoice. The company has averaged an annual growth in book value of 19.7% since the last 49 years. Not surprisingly, Warren Buffet completes his 50th anniversary at the company this year. An annual meeting will be conducted in Omaha where 40,000 shareholders are expected to attend. CEO Warren Buffet and Charlie Munger (Trades, Portfolio), Vice Chairman will answer investors queries for around 5 hours.
Our take
Berkshire Hathaway reported $857 million profit from derivatives alone. If share value increases over the long-term future, the company will stand a chance to gain a lot. Moreover, the strong value of the US dollar attributed to the gains. Contracts undertaken in foreign currencies reaped higher profits due to less liabilities. Overall, the conglomerate seems to be going very well. Hope the "50 Years of a Profitable Partnership," the 2015 meeting, will bring good news for the company’s investors.
