Berkshire Hathaway profits rise on economic recovery

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Warren Buffett’s Berkshire Hathaway reported a 7 percent increase in profit in the second quarter, with several companies owned by the sprawling group benefiting from the economic recovery.

The investment firm revealed Saturday that it earned $28.1 billion, or $18488 per Class A share, in the three months through the end of June.

Operating profit, which removes fluctuations in the value of Berkshire’s investments and which Buffett uses as a preferred measure of the company’s business performance, rose 21 percent from the previous year to $6.7 billion.

Results were rosy across the board for nearly all of the Berkshire companies, with a 34 percent jump in BNSF railroad profits and a 40 percent increase in pre-tax profits from its division that builds homes and parts manufacturers for new construction.

The company noted that results in some of its businesses were “beyond pre-pandemic levels,” even as it grappled with supply chain disruptions and rising inflation, issues that afflicted small and large businesses alike.

A note on the “significant” recovery Berkshire said it was experiencing, in addition to the optimism of its management team, can also be gleaned from the fact that the company no longer says its “business continues to suffer from the negative effects of the pandemic” as it did in the previous quarter.

The strong results offset an expected weaker showing from the company’s massive equity portfolio.

The improvement in Berkshire reflects the recovery underway in the vast majority of businesses in corporate America, as the country recovers from the worst economic devastation seen at the nadir of the crisis.

Profits for S&P 500 companies rose 93 percent in the second quarter from last year’s levels, according to data provider Refinitiv, with several companies holding back Wall Street expectations as consumer and industrial demand rebounded.

The cash pile that Berkshire is closely watching fell to $144 billion, down $1.4 billion from the previous year. The company also remained a net seller of shares for the quarter, according to its financial disclosures, and was restricted on the acquisition front. James Shanahan, an analyst with Edward Jones, estimates that Berkshire has sold $13.6 billion more stock than it bought since early 2020.

However, the value of its stock portfolio rose to $308 billion at the end of June.

It spent $6 billion in the first quarter to buy back its stock, just under the $6.6 billion it used in the first three months of the year to buy back stock.

The near-record pile of cash might discourage some long-time investors who had hoped the so-called Oracle of Omaha would find the kind of investment opportunity that made Berkshire a household name and a must-see stock.

Investors are likely to applaud stock buybacks this quarter. . . It’s also likely to remain focused on the more than $100 billion in cash from Berkshire and potential acquisitions that could be made with these assets, said Kathy Seifert, an analyst at CFRA that covers Berkshire.

The company’s quarterly results are often analyzed by investors around the world for insights into how the economic tide is turning, given that Berkshire has a portfolio of unrelated projects. Figures in the quarterly filing of securities regulators showed how hard-hit parts of the economy have recovered.

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Revenues for Berkshire-based TTI, which distributes electronic components, jumped more than 50 percent as demand for chips and other manufactured goods boomed. NetJets, the part-ownership of aircraft and Marmon manufacturing unit and car sales business in Berkshire, also posted a strong rise in demand.

Chemical company Lubrizol said it saw a twofold increase in sales. But profits slipped as it paid $160 million in the quarter to cover the costs of a June fire at a facility in Illinois.

Geico, the insurance company that is among Berkshire’s crown jewels, was among the few weaknesses. Earnings before taxes are down 70 percent from the previous year as more Americans return to the open road, driving up insurance claims.

Class A shares in the company are up 24 percent this year, outpacing the 18 percent rise of the Standard & Poor’s 500 Index.

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