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Buffett’s Berkshire
Q3 Earnings & Revenues Rise Y/Y

Berkshire Hathaway reported Q3 increase in earnings by 11% and revenues by 21% while reporting on a GAAP basis, a net loss of $12.8 billion. Ingrid Hendershot, President of Hendershot Investments, an investment management firm, reviews the Q3 results and looks into the different operating segments and holdings of Berkshire Hathaway, the firm’s top investment position.

Berkshire Hathaway (BRK.B) reported the company’s net worth during the first nine months of 2023 increased by 11%, or $51.9 billion, to $525.3 billion with book value equal to about $363,293 per Class A share as of 9/30/23. Berkshire boasts the largest shareholders’ equity of any U.S. company.

On a GAAP basis, Berkshire reported a net loss of $12.8 billion during the third quarter compared to a $2.8 billion loss in the prior year quarter. Investment gains and losses from changes in the market prices of Berkshire’s substantial equity investments will produce significant volatility in earnings and these investment unrealized “paper” gains or losses in any given quarter is usually meaningless. Berkshire’s five major equity investment holdings which represent about 78% of total equities held, include American Express at $22.44 billion (which charged 1% higher during the first nine months or $0.2 billion); Apple at $156.8 billion (which jumped 32% during the first nine months or a juicy $37.8 billion); Bank of America at $28.3 billion (which declined 17% or $5.9 billion in value year-to-date due to banking woes); Coca-Cola at $22.4 billion (which fizzled 12% or $3 billion) and Chevron at $18.6 billion (which was 38% lower or $11.4 billion in value, reflecting partial sales of the position).

During the third quarter, Berkshire’s revenues rose 21% to $93.2 billion, aided by the $13.2 billion contribution from Pilot Travel Centers which was consolidated into Berkshire’s results following the acquisition of Berkshire’s additional 41.4% ownership interest in the company, bringing Berkshire’s total ownership in Pilot to approximately 80%. Excluding the acquisition of Pilot, revenues rose 4% during the third quarter. Berkshire’s operating earnings increased 40.6% during the third quarter to $10.7 billion, primarily led by a turnaround in Berkshire’s insurance businesses.

During the third quarter, Berkshire’s insurance businesses generated $2.4 billion from underwriting earnings compared to a loss of $1.1 billion in the prior year quarter due to improvements at GEICO, relatively low catastrophe losses, and the acquisition of Alleghany Insurance. Insurance investment income increased 75% during the quarter to $2.5 billion, reflecting higher interest income as short-term interest rates increased significantly. The float of the insurance operations increased $3 billion since year end to end the quarter at about $167 billion. The combined cost of float was negative during the first nine months due to the $2.4 billion in underwriting gains year-to-date.

Burlington Northern Santa Fe’s revenues declined 12.6% during the quarter to $5.8 billion, reflecting lower volumes of 4.8% and average revenue per car/unit decreasing 7.1% due to decreased rates per car/unit and lower surcharge revenue, partially offset by favorable changes in business mix. Net earnings rolled 15.3% lower to $1.2 billion. The decrease was primarily due to lower overall freight volumes and higher non-fuel operating costs, partially offset by lower fuel costs.

Berkshire Hathaway Energy reported revenues declined 3.6% during the third quarter to $7.3 billion with net earnings declining 68.9% to $498 million. The earnings decrease reflected lower earnings from the U.S. regulated utilities, increased wildfire loss estimates of $1.4 billion in the third quarter, as well as lower earnings from other energy businesses and real estate brokerage businesses.

Comparative operating results for Pilot Travel Center were detailed following the consolidation of the business with revenues and earnings highly dependent on fuel volumes, prices and margins. During the third quarter, Pilot’s revenues traveled 31% lower to $13.2 billion with pre-tax earnings declining 60% to $291 million due to significantly lower fuel prices as well as from lower fuel sales volumes.

Berkshire’s Manufacturing businesses reported third quarter revenues increased 0.9% to $19.2 billion with operating earnings up 6.7% to $3.1 billion. The industrial products segment led the way for the quarter with revenues rising 12% to $8.7 billion and operating earnings increasing 3.8% to $1.4 billion thanks to improvements at Precision Castparts, IMC and Marmon including acquisitions as part of the Alleghany deal. The building products segment revenue declined 11.2% to $6.7 billion and operating earnings declined 5.6% to $1.2 billion, primarily due to the significant increases in home mortgage rates slowing demand. The consumer products segment revenue increased 2% to $3.7 billion and operating earnings were up 78% to $483 million, primarily due to the Jazwares acquisition and improved earnings of the apparel and footwear businesses.

Service and Retailing revenues increased 1.2% during the quarter to $23.4 billion with pre-tax earnings decreasing 1% to $1.3 billion. The Retailing group led the way as revenue increased 1% to $4.8 billion with pre-tax earnings up 4.5% to $414 million, primarily due to higher new vehicle sales and profits at Berkshire Hathaway Automotive.

Berkshire’s balance sheet continues to reflect significant liquidity and a very strong capital base of $525.3 billion as of 9/30/23. Excluding railroad, energy and utility investments, Berkshire ended the first half of the year with $520.5 billion in investments allocated approximately 61.2% to equities ($318.6 billion), 4.3% to fixed-income investments ($22.4 billion), 29.2% in cash and equivalents to a record ($152.0 billion) and 5.2% in equity method investments ($27.5 billion), which includes 26.5% ownership of Kraft Heinz and 25.3% ownership of Occidental Petroleum. Warren Buffett noted at the annual meeting he has no plans to acquire Occidental Petroleum.

Free cash flow increased 31% during the first nine months to $21.1 billion due to higher earnings. During the nine months, capital expenditures approximated $13.7 billion, which included $9.4 billion for BNSF and BHE, its railroad and utility and energy units. Berkshire expects capital expenditures for BNSF and BHE to approximate $4.2 billion for the fourth quarter.

During the first nine months, Berkshire paid cash of $9.1 billion to acquire equity securities and received proceeds of $32.8 billion from the sale of stocks, including the partial sales of Chevron, BYD, the Chinese electric vehicle manufacture, and several bank holdings. The equity sales generated $3.9 billion in after-tax realized gains during the first nine months. In addition, Berkshire purchased a net $27.3 billion in Treasury Bills and fixed-income investments. On January 31, 2023, Berkshire acquired an additional 41.4% interest in Pilot for approximately $8.2 billion which brought Berkshire’s ownership of Pilot up to 80%. On September 1, 2023, Berkshire Hathaway Energy acquired an additional 50% interest in Cove Point LNG for $3.3 billion, which increased its interest to 75%.

Berkshire repurchases its shares at prices below Berkshire’s intrinsic value, as conservatively determined by Warren Buffett and Charlie Munger. During the first nine months, Berkshire repurchased $7 billion of its common stock, including $1.1 billion during the third quarter. These repurchases included 1,115 Class A shares purchased at an average price of approximately $550,814 per share and 143,675 Class B shares purchased an average price of $357.22 per share during September 2023.

Editor’s Note: Ingrid Hendershot, CFA is the founder and president of Hendershot Investments Inc., an investment management firm established in 1994. She is also the editor of Hendershot Investments, a quarterly investment newsletter designed for long-term investors seeking capital growth at reasonable valuations, 1 yr. $50. For services offered by Hendershot Investments, visit

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