Berkshire Hathaway’s
operating earnings after taxes rose 28% to $8.5 billion in the fourth quarter of 2023 on strength in the company’s large insurance business and higher investment income, according to earnings results the conglomerate posted Saturday morning. Profits declined at Berkshire’s big utility and energy business and at the Burlington Northern Santa Fe railroad.
The company’s operating profits per class A share totaled $5,881 in the fourth quarter, up 30% versus the fourth quarter of 2022 and topping the consensus estimate from FactSet of $5,717 per share. The per share operating earnings were calculated by Barron’s.
Berkshire Hathaway bought back $2.2 billion of stock in the fourth quarter, up from $1.1 billion in the third quarter of 2023. Total repurchases for 2023 were $9.2 billion—up from $7.9 billion in 2022, but down from the record $27.1 billion in 2021.
Total earnings after taxes in the fourth quarter were $37.6 billion, up from $18.1 billion in the fourth quarter of 2022. The outsize total profits in the latest quarter reflects paper gains in Berkshire’s huge equity portfolio totaling over $350 billion. The fourth-quarter equity gains were led in Apple, Berkshire’s largest equity holding—which accounts for about half the portfolio.
CEO Warren Buffett tells investors to focus on operating earnings excluding reported investment gains—both paper and realized—because the gains are one-time in nature and don’t reflect the company’s underlying earnings power.
Berkshire’s total holdings of cash and equivalents rose to a record $167.7 billion at the end of the fourth quarter from $157 billion on Sept. 30.
Book value rose to about $389,000 per class A share in the fourth quarter from $363,000 in the third quarter, reflecting gains in the equity portfolio and operating profits. The book value per share figure is a Barron’s estimate based on shareholder equity disclosed in the annual report. Berkshire doesn’t pay a dividend.
Berkshire was a buyer of $600 million of stock in the first quarter through Feb. 12, Barron’s calculates. This is based on a comparison of the share count on Feb. 12 as disclosed in Berkshire’s 10-K with the year-end 2023 total.
It’s not surprising that Berkshire was a light buyer of its stock in 2024 since it has risen sharply and set a string of record highs. Berkshire’s buybacks are determined by Buffett, who has stated that he is price-conscious.
The class A shares ended Friday at $628,930, up 0.6% in the session after setting a new record, while the class B shares rose 0.5% to $417.22. The class B shares are up 17% this year, while the class A stock is 16% higher. Both are easily topping the
S&P 500,
which has returned about 7% so far in 2024. Berkshire stock now trades for about 1.6 times its year-end 2023 book value, above the range in past few years of closer to 1.4 to 1.5 times book.
Berkshire disclosed in its 10-K that it purchased the remaining 20% of Pilot Travel Centers for $2.6 billion in January under an agreement with the Haslam family, which had sold 80% of the truck-stop operator to Berkshire in two stages in 2017 and 2023. The Haslams had a sale or “put” option for the remaining 20% in early 2024 that became the focus of a legal battle between Berkshire and the family in late 2023. The two parties resolved the dispute in early 2024. The $2.6 billion figure is in line with expectations, given the $3 billion value that Berkshire put on the 20% remaining stake in Pilot last year.
Berkshire’s operating profits after taxes of $8.5 billion in the fourth quarter are understated because they include $684 million of foreign exchange losses—likely related to yen debt that Berkshire used to finance its highly profitable purchase of five Japanese trading companies.
Berkshire’s insurance business, including auto insurer Geico and large property and casualty reinsurance operations, had an underwriting profit of $848 million in the fourth quarter, compared with a profit of $160 million in the year-earlier period.
Geico’s turnaround continued in the fourth quarter as the company notched an underwriting profit of $1.3 billion, Barron’s calculates, compared with a loss of $400 million in the year-earlier period. Geico, like other auto insurer, is sharply raising prices—and letting customer policies lapse—to restore profitability. Average premium per policy was up about 17% in 2023, but Geico’s policies in force were down 10%.
Insurance investment income rose to $2.8 billion in the fourth quarter from $2 billion in the year-earlier period on higher cash balances and higher yields on Treasury bills, Berkshire’s preferred vehicle for holding cash. Berkshire held more than $130 billion of T-Bills at year-end 2023 and they yield more than 5%.
Earnings at Burlington Northern Santa Fe dropped to about $1.4 billion after taxes from $1.5 billion in the year-earlier period. In his annual shareholder letter, Buffett cited higher costs, particularly for wages.
“Last year BNSF’s earnings declined more than I expected, as revenues fell. Though fuel costs also fell, wage increases, promulgated in Washington, were far beyond the country’s inflation goals. This differential may recur in future negotiations,” Buffett wrote in his annual letter.
Earnings at Berkshire Hathaway Energy, the company utility and energy business, declined to $632 million in the fourth quarter from $739 million in the year-earlier period and were down about 40% last year to $2.3 billion.
Buffett cited a “severe” earnings disappointment at BHE, writing in his annual letter about adverse regulatory action in some Western states where the company operates related to wildfires.
“It will be many years until we know the final tally from BHE’s forest-fire losses and can intelligently make decisions about the desirability of future investments in vulnerable western states,” Buffett wrote.
Berkshire continued to be a net seller of equities in the fourth quarter. Net sales in the period were less than $1 billion, Barron’s calculates. There were about $7 billion of purchases and $8 billion of sales in the period. For 2023, Berkshire sold about $40 billion of stocks and purchased around $16 billion.
Berkshire has kept confidential the purchase of one or more U.S. stocks in third and fourth quarters in its quarterly 13-F regulatory filing of its equity holdings. The “mystery” stock has been the subject of speculation by Barron’s and elsewhere. It is likely a U.S. financial stock with Berkshire’s cost basis in financial stocks rising by about $1 billion in the third quarter and about $2.4 billion in the fourth quarter, according to the 10-K.
This suggests that any new financial stock holding doesn’t appear to be particularly large. Barron’s has written that three possibilities for the mystery stock are
Chubb,
BlackRock
and
Morgan Stanley.
Write to Andrew Bary at andrew.bary@barrons.com
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