Morningstar

Berkshire Bounces Back in Q1 on Solid Operating Results

Revenue, which includes unrealized and realized gains/losses from Berkshire's investments and derivatives portfolios, increased significantly.

Securities In This Article
Berkshire Hathaway Inc Class A
(BRK.A)
Berkshire Hathaway Inc Class B
(BRK.B)

With wide-moat-rated Berkshire Hathaway BRK.B BRK.A reporting stronger first-quarter results than we had been forecasting, we may need to reassess our $440,000 ($293) per Class A (B) share fair value estimate. That said, a lot of this will be driven by our ability to uncover tidbits of information related to the lasting impacts that the coronavirus pandemic could have on Berkshire's operating subsidiaries, which would allow us to make more informed projections for the firm's businesses.

First-quarter revenue, which includes unrealized and realized gains/losses from Berkshire's investments and derivatives portfolios, increased significantly to $70.3 billion (from negative $9.0 billion in the prior year's period). Excluding the impact of investment and derivative gains/losses and other adjustments, first-quarter operating revenue increased 5.4% to $64.6 billion. Operating earnings, exclusive of the impact of investment and derivative gains/losses, increased 19.5% year over year to $7.0 billion during the March quarter. When including the impact of the investment and derivative gains/losses, operating earnings increased significantly to $11.7 billion (from negative $49.7 billion in the prior year's period).

Book value per share, which still serves as a decent proxy for measuring changes in Berkshire's intrinsic value, increased 1.8% sequentially to $292,175 (from $287.031 at the end of December), slightly below our forecast of $294,207. The company closed out the March quarter with $141.4 billion in cash and cash equivalents, up from $138.3 billion at the end of last year. This left Berkshire with an estimated $116.7 billion in dry powder that could be committed to investments, acquisitions, and share repurchases. The company repurchased $6.6 billion of common stock, spent $47 million on bolt-on acquisitions, and was a net seller of equities during the March quarter.

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About the Author

Greggory Warren, CFA

Strategist
More from Author

Greggory Warren, CFA, is a strategist, AM Financial Services, for Morningstar*. He covers the traditional US- and Canadian-based traditional asset managers, as well as the alternative asset managers and Berkshire Hathaway. Over the course of his career, Warren has covered not only financial services names but companies from the consumer staples and consumer cyclicals sectors, and been involved in portfolio stock selection and management.

Prior to joining Morningstar in 2005, Warren worked as a buy-side equity analyst for more than eight years, covering consumer staples and consumer cyclicals. Before assuming his current role at Morningstar in 2017, Warren covered the financial-services sector as a senior analyst since late 2008. Prior to that time, he covered the non-alcoholic beverage manufacturers and distributors, packaged food firms, food service distributors, and tobacco companies.

Warren holds a bachelor's degree in accounting and English from Augustana College. He also holds the Chartered Financial Analyst® designation and is a member of the CFA Society of Chicago.

During 2014-19, Warren was selected to participate each year on the analyst panel at Berkshire Hathaway’s annual meeting, asking questions directly of Warren Buffett and Charlie Munger. The analyst panel was disbanded ahead of Berkshire’s 2020 annual meeting. Warren also ranked second in the investment services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey in 2013, the last year the survey was conducted.

* Morningstar Research Services LLC (“Morningstar”) is a wholly owned subsidiary of Morningstar, Inc

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