Berkshire Hathaway Q3 working earnings slip by (NYSE:BRK.B)

Editor’s observe: A earlier model of the story had incorrectly acknowledged a Y/Y decline within the headline and first paragraph.

Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) Q3 working earnings fell from Q2 as its insurance coverage underwriting loss, damage by Hurricane Ian, elevated and railroad revenue slipped on decrease quantity and better prices.

On a Y/Y foundation working earnings elevated 20%, helped by greater insurance coverage funding earnings, utilities and vitality revenue, and different managed companies.

The corporate purchased again ~$1.05B of its widespread inventory in the course of the quarter, in contrast with ~$1.0B in Q2 and $3.2B in Q1.

The funding behemoth that Warren Buffett constructed held ~$109.0B of money and short-term securities as of Sept. 30, 2022, up from the $105.4B on June 30.

Q3 working earnings of $7.76B fell from $9.28B in Q2 and elevated from $6.47B in Q3 2021.

Q3 underwriting outcomes took a $2.7B hit from Hurricane Ian, in contrast with a $1.7B after-tax cost from Hurricane Ida and European floods in Q3 2021. The underwriting outcomes have been additionally damage by will increase in non-public passenger vehicle claims frequencies and severities however have been helped by greater international foreign money alternate price positive aspects.

Insurance coverage float was ~$150B at Sept. 30, 2022 in contrast with ~$147B at June 30.

Whole income rose to $76.9B within the quarter from $76.2B within the prior quarter and from $70.6B a 12 months earlier.

Funding and spinoff losses of $10.4B in Q3 2022, most of which is unrealized, narrowed from the $53.0B loss within the prior quarter and contrasted with a acquire of $3.88B within the year-ago quarter. That resulted in a Q3 web lack of $1.83B, in contrast with a web lack of $43.8B in Q2 and web earnings of $6.88B in Q3 2021.

Its investments in fairness securities amounted to $306.2B in truthful worth at Sept. 30, 2022 vs. $350.7B in truthful worth at Dec. 31, 2021. Some 73% of the combination truthful worth was concentrated in 5 corporations — American Categorical (AXP) at truthful worth of $20.5B; Apple (AAPL) at $126.5B; Financial institution of America (BAC) at $31.2B; Coca-Cola (KO) at $22.4B and Chevron (CVS) at $24.4B.

The truthful worth of its holdings in Kraft Heinz stands at $10.9B and in Occidental Petroleum (OXY) stands at $11.9B as of Sept. 30.

Whole prices and bills of $57.0B elevated from $54.6B in Q2 and from $54.0B in Q3 2021.

Railroad pretax earnings fell 7.1% Y/Y, impacted by decrease freight volumes and better gasoline and different working prices, which have been partially offset by greater income per automobile.

Its industrial merchandise group noticed pretax earnings rise 22% Y/Y on greater promoting costs and elevated demand in some product classes, partly offset by greater materials and vitality prices, manufacturing inefficiencies because of provide chain disruptions, and labor shortages and asset impairment prices. The stronger greenback additionally had a adverse impact.

Its shopper merchandise group pretax earnings dropped 44% Y/Y, reflecting decrease earnings from attire and footwear companies and from Duracell.

Retailing group pretax earnings fell 4.3% Y/Y, as declining earnings at its furnishings retailers and Pampered Chef offset the 25% Y/Y earnings enhance at Berkshire Hathaway Automotive.

Working earnings by enterprise phase:

• Insurance coverage – underwriting: -$962M vs. $581M in Q2 and -$784M in Q3 2021;
• Insurance coverage – funding earnings: $1.41B vs. $1.91B in Q2 and $1.16B in Q3 2021;
• Railroad – $1.44B vs. $1.66B within the prior quarter and $1.54B within the year-ago quarter;
• Utilities and vitality — $1.59B vs. $766M in $1.50B in Q3 2021;
• Different managed companies — $3.25B vs. $2.71B a 12 months earlier:
• Non-controlled companies — $362M vs. $310M a 12 months in the past;
• Different — $679M vs. $39M a 12 months in the past.

SA contributor Jim Sloan explains why Berkshire (BRK.B) is an “perfect core holding.