OMAHA, Neb. (AP) — Warren Buffett's company, Berkshire Hathaway, reported a profit increase of 17% due to a comparatively mild hurricane season and additional gains in paper investments this year. This upswing comes as the 95-year-old investor prepares to pass on the CEO responsibilities to Vice Chair Greg Abel in January. However, Berkshire's recent $9.7 billion investment in Occidental Chemical (OxyChem) will not significantly reduce the company's substantial cash reserves, which totaled $381.7 billion at the end of September. This investment marks the largest deal Berkshire has executed in several years.
Currently, the main focus for many investors is the imminent transition of leadership from Buffett to Abel. While Buffett will retain his position as chairman, the Class A shares of Berkshire Hathaway are trading well below their peak price of $812,855, which was reached just before Buffett's unexpected announcement about his step back during the annual meeting in May. As of last Friday, the stock closed at $715,740, and the company did not repurchase any stock during the quarter, indicating that Buffett views it as overvalued at this time.
CFRA Research analyst Cathy Seifert anticipates that, following Abel's succession as CEO, there will be heightened demands from investors for transparency and clarity regarding the company's strategies. There is also an increasing chorus for Berkshire to consider issuing dividends if it cannot identify effective ways to deploy its hefty cash holdings. Despite Buffett remaining as chairman, immediate shifts in strategy may not be expected.
Seifert expressed that the lack of discussion and communication from Berkshire has left many investors feeling frustrated. The company does not have dedicated public or investor relations teams and typically avoids the quarterly investor calls that are common among public firms. Instead, Buffett prefers to disseminate results to all investors simultaneously on Saturdays, allowing them the weekend to process the information before markets reopen.
Edward Jones analyst Jim Shanahan expressed enthusiasm for potential changes under Abel's leadership, particularly regarding the formation of a more collaborative executive team to handle business operations and investment decisions. Some stakeholders may need to wait until Abel’s first shareholder letter in late February or the annual meeting in May to gather more information about his intended direction for the company.
Abel has been overseeing all non-insurance businesses within Berkshire since 2018. Colleagues who report to him have noted his strong business acumen, helpfulness, and responsiveness to inquiries, which bodes well for his leadership transition.
Berkshire Hathaway announced that it earned $30.796 billion, or $21,413 per Class A share, during the latest quarter, marking an increase from last year's profit of $26.251 billion, or $18,272 per Class A share. However, it is crucial to note that these profit figures can be distorted by the fluctuating value of Berkshire's extensive investment portfolio and stock sales, which significantly added $17.3 billion to its profits this year.
Buffett has often recommended focusing on Berkshire's operating earnings for a clearer picture of its core operations, which include prominent insurers like Geico, the BNSF railroad, various utilities, and numerous manufacturing and retail businesses. In this context, Berkshire's operating profit surged to $13.485 billion, or $9,376.15 per Class A share, highlighting a strong rebound in its insurance sector. This is a notable increase from last year's operating earnings of $10.09 billion, or $7,023.01 per Class A share.
Analysts from FactSet Research had predicted that Berkshire's operating earnings would be reported at $8,573.50 per Class A share. Berkshire's insurance division saw a marked improvement, with a $1.6 billion increase in underwriting profit, attributed to fewer catastrophic losses from hurricanes compared to the previous year when Hurricane Helene significantly impacted the Southeast. The company also benefited from gains of $331 million from foreign currency debt, contrasting with a $1.1 billion loss on such holdings last year.
While most of Berkshire's subsidiaries performed solidly during the quarter, there were declines in profits of nearly 9% within its utilities sector, yielding $1.489 billion. The company also pointed out some weakness in its retail segments amid ongoing economic uncertainty and reduced consumer confidence. Earnings from specific brands like Fruit of the Loom, Duracell, Forest River RVs, and the toy company Jazwares, known for its plush Squishmallows, experienced declines.
Despite these challenges, Berkshire's overall revenue increased modestly by approximately 2% to $94.972 billion, reflecting a varied performance across its diverse business portfolio.
