Sunday, 18 November, 2018

Buffett's Berkshire doubles profit, repurchases US$900 million stock in third quarter

Berkshire Profit Surges as Buffett's Insurers Weather Storms Berkshire Profit Surges as Buffett's Insurers Weather StormsMore
Jean Garcia | 06 November, 2018, 12:17

Lower taxes and strong results from its insurance operations helped Warren Buffett's Berkshire Hathaway (BRK) double operating profit in the quarter ended September 30.

Operating profit in the third quarter doubled to $6.88 billion from $3.44 billion a year earlier, and higher than the $6.11 billion expected by Wall Street, according to IBES data from Refinitiv.

The firm also repurchased just under $1bn of stock, suggesting Buffet sees a shortage of appealing investment options.

Warren Buffett's industrial and insurance conglomerate, said its net income jumped to $18.5 billion from $4.1 billion a year ago.

"This is absolutely one of the biggest quarterly earnings reports that has ever come out of a United States corporation", Bill Smead, chief executive of Smead Capital Management, a Berkshire Hathaway shareholder was quoted as saying by CNBC. That's much better than last year's $1.4 billion underwriting loss when hurricanes Harvey, Irma and Maria caused devastation and Mexico endured earthquakes.

Berkshire Hathaway Inc. owns more than 90 companies, including the railroad and clothing, furniture and jewelry businesses. Still, he's struggled to find ways to invest a swelling cash pile that has surpassed $100 billion each of the past five quarters.

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Berkshire also reported a rare stock buyback of $928 million after the board in July removed strict limits that essentially prohibited share repurchases.

"Overall, it's a very strong report", said Andy Kilpatrick, a retired stockbroker and author who wrote "Of Permanent Value: The Story of Warren Buffett". That amounts to dipping a toe, since he's still left with a US$103.6 billion pile of cash to put to work. Their results painted a picture of a USA economy that continues to grow but faces increased pressure from rising costs, in part due to the Trump administration's imposition of tariffs.

Yet at Burlington Northern Santa Fe LLC, Berkshire's rail business, they were able to increase prices as more businesses ship by rail due to tight supply in the trucking market.

By that measure, Berkshire reported operating earnings of $6.88 billion, or about $2.79 per Class B share.

Berkshire Hathaway (NYSE:BRK.A) was upgraded by equities researchers at ValuEngine from a "hold" rating to a "buy" rating in a research note issued on Monday, October 8th. As of September 30, Berkshire owned a $57.6 billion stake in Apple.

"It reconfirms what we've known for a long time, which is that the stock has been under-priced".

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