Warren Buffett's Berkshire Hathaway reported stronger-than-expected first-quarter earnings Saturday, led by a turnaround in car insurer Geico.
The conglomerate also held its annual shareholder meeting over the weekend.
BRKB stock rose Monday. But Occidental Petroleum shares fell after the "Oracle of Omaha" said Berkshire doesn't plan to take over the oil giant.
Berkshire Earnings From Operating Businesses
Berkshire Hathaway posted a 12.6% in operating earnings, year over year, to $8.065 billion. On a per-share basis, Berkshire earnings came in at $3.69 vs. analyst expectations for $3.58, according to FactSet.
Operating earnings reflect total profits from the companies that Berkshire owns and runs. Those businesses include insurance and reinsurance, utilities and energy, freight rail transportation, manufacturing and retailing.
Insurance underwriting and insurance investment income surged in Q1 vs. a year ago.
Geico, the jewel in Berkshire's vast insurance portfolio, returned to profitability after six quarters of losses. It swung to a Q1 underwriting profit of $703 million, which follows a $1.9 billion pretax underwriting loss last year.
The BNSF rail and energy segments saw year-over-year earnings declines.
Net earnings, including short-term investment gains, spiked to $35.5 billion from $5.58 billion a year earlier. Berkshire's net earnings reflect changes in the value of its Dow-stocks-heavy investment portfolio.
Apple, which makes up nearly 42% of Berkshire's total equity portfolio, jumped nearly 27% last quarter.
Buffett has long said investors should focus on operating earnings, not net earnings.
During the quarter, the Buffett-led company sold stocks worth a net $10.4 billion. But Berkshire buybacks grew to $4.4 billion, up 57% from Q4's $2.8 billion. That's the most since Q1 2021.
Still, Berkshire ended the quarter with $130.62 billion in cash, up from Q4's $128 billion.
Among other remarks at the shareholding meeting Saturday, Buffett dismissed speculation that Berkshire plans to acquire Occidental Petroleum. But Buffett said he remains happy with a 23.5% stake and warrants in the Houston-based energy producer.
Berkshire Hathaway started gathering Occidental shares in February 2022, roughly coinciding with the Russian invasion of Ukraine.
BRKB Stock, Warren Buffett Stock Holdings
Class-B shares of Berkshire Hathaway rose 1.1% to 327.64 on the stock market today.
Heading into Q1 earnings, BRKB stock shows a cup base with a 362.20 buy point, the IBD MarketSmith charts show.
Year to date, Berkshire stock is up 5.7% vs. a 7.7% gain for the S&P 500 index.
OXY stock lost 1.9% to 59.52 Monday. Occidental Petroleum earnings are due Tuesday.
Apple stock popped 4.7% on earnings Friday, following four straight days of declines. Shares eased 0.5% Monday.
Among other Berkshire stock holdings, Bank of America and OXY shares also rallied Friday after four down days.
Areas To Watch
Ahead of Berkshire's annual meeting, Berkshire investors awaited CEO and Chairman Buffett's comments on various important issues, amid uncertainty over the economic outlook.
According to investment research firm CFRA, these were some areas to watch:
- Will Buffett's Berkshire catch up on climate and ESG initiatives? In a May 3 note, CFRA analyst Catherine Seifert said the company is "lagging" on ESG disclosures, while shareholder proposals on climate and ESG (environmental, social and governance) issues will be put to vote again after being "defeated" for several years. She also wondered how Berkshire Hathaway Energy's business mix (which includes both fossil fuels and renewables) will shake out "10 years from now."
- What steps is the Geico car insurance unit taking to offset loss-cost inflation after turning into a drag on Berkshire's earnings? And how does the company plan to leverage "very strong" reinsurance demand and pricing?
- What is Buffett's banking sector outlook, especially for regional banks? Buffett has dumped several bank stocks of late but Bank of America remains his company's top equity holding by number of shares.
- What is Berkshire's long-term strategy for its hefty and growing investments in Occidental Petroleum and Chevron? What is its energy outlook after the recent decline in oil and gas prices?
- How is Buffett's acquisition strategy evolving with its welling "dry powder" reserves? Berkshire Hathaway's cash hoard now surpasses $128 billion while its last big takeover was Alleghany Corp. (a fellow insurance-based conglomerate, known as the "mini Berkshire") for $11.6 billion in 2022.
- What will a growing cash pile mean for Berkshire's capital allocation and stock buyback policy? And will the company initiate a cash dividend on its common shares? Berkshire slowed the pace of buybacks last year, with share repurchases of $7.9 billion in 2022 vs. $27.1 billion in 2021 and $24.7 billion in 2020.
