Gerry Miller | CNBC
Warren Buffett’s Berkshire Hathaway on Saturday reported a decline in first-quarter earnings as the conglomerate was not immune to the slowing US economy.
The company’s net income was $5.46 billion, down more than 53% from $11.71 billion in the same period a year ago.
Berkshire’s operating earnings — which encompass profits made from the conglomerate’s myriad of businesses such as insurance, rail and utilities — were flat year-over-year at $7.04 billion. This comes amid a sharp drop in the company’s insurance underwriting business; segment profits fell nearly 94% to $47 million from $764 million in the same period a year ago.
Profits for Berkshire’s manufacturing, services and retail segment jumped 15.5% to $3.03 billion in the quarter, while rail and utilities profits rose slightly.
These operating results came as the US economy contracted in the first quarter for the first time since the start of the Covid-19 pandemic.
The company also took a big hit to its investments, reporting a loss of $1.58 billion amid a broader market decline. To be sure, Buffett always advises shareholders to ignore these quarterly investment fluctuations.
“The amount of investment gains (losses) in any given quarter is generally meaningless and provides earnings per share figures that can be extremely misleading to investors who have little or no knowledge of accounting rules,” Berkshire said in Saturday’s statement. .
Berkshire’s share buybacks also slowed to $3.2 billion from $6.9 billion in the fourth quarter of 2021 as the company was more active in trading in the last quarter than it had been in a long time.
In late March, the company said it had agreed to buy insurance company Alleghany for $11.6 billion — marking Buffett’s biggest deal since 2016. Berkshire also revealed a stake in oil giant Occidental Petroleum that is now worth more than $100 billion. 7 billion, along with a position in HP Inc that’s now valued at over $4.5 billion.
Despite the difficult environment, Berkshire as an investment was this year this year. The conglomerate’s Class A shares are up more than 7% on the year – outperforming the S&P 500, which is down 13.3% in 2022. Although down from the fourth quarter, the company still showed a massive cash reserve of $106.3 billion. at the end of the first quarter.
The company’s latest quarterly figures come as thousands of people gather in Omaha, Nebraska, for Berkshire’s annual meeting, where Buffett and Vice President Charlie Munger will answer questions from shareholders. (CNBC will host the exclusive live broadcast on Saturday, starting at 9:45 am ET.)
Some of the topics Berkshire shareholders will want the pair to discuss include their market outlook – given recent inflationary pressures and rising rates – as well as more clarity about the company’s succession plan.
Check out all coverage of the CNBC Berkshire Hathaway Annual Meeting on here.