Berkshire's Results As Expected

With wide-moat Berkshire Hathaway's BRK.A/BRK.B fourth-quarter and full-year operating results being more or less in line with our expectations, we are leaving our $380,000 ($253) per Class A (B) share fair value estimate in place. With the company lapping a difficult fourth quarter on the investment side of things, fourth-quarter (full-year) revenue, which includes unrealized and realized gains/losses from Berkshire's investments and derivatives portfolios, increased 243.7% (45.2%) to $96.9 ($327.2) billion. Excluding the impact of investment and derivative gains/losses and other adjustments, fourth-quarter (full-year) operating revenue increased 3.0% (2.7%) to $65.6 ($254.6) billion. Meanwhile, net operating earnings, excluding the impact of investment and derivative gains/losses, declined 22.7% (3.3%) year over year to $4.4 ($24.0) billion during the fourth quarter (full year), as expenses rose faster than revenue (especially in the back half of the year). When including the impact of the investment and derivative gains/losses, Berkshire's net earnings increased dramatically, having lapped poor investment results during the fourth quarter of 2018, with the company reporting $29.2 ($81.4) billion in fourth-quarter (full-year) net earnings compared with negative $25.4 (positive $4.0) billion in the prior year's period(s). Book value per share, which still serves as a decent proxy for measuring changes in Berkshire's intrinsic value, increased 7.2% sequentially to $260,906 (from $243,483 at the end of the September quarter), better than our forecast of $252,614. The company closed out 2019 with a record $128.0 billion in cash and cash equivalents, down slightly from $128.2 billion at the end of the third quarter of 2019 (but up from $111.9 billion at the end of 2018). This left Berkshire, by our estimates, with around $104 billion in dry powder at the start of 2020 that could be committed to investments, acquisitions, share repurchases, and dividends.

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