In this news, we discuss the Buffett’s Berkshire suffers in pandemic even as Apple boosts profit.
(Reuters) – Warren Buffett’s Berkshire Hathaway Inc on Saturday reported lower quarterly operating results and said the coronavirus pandemic could cause further damage, even as gains in stocks such as Apple Inc generated a overall profit of over $ 30 billion.
As some Berkshire operating companies have rebounded from their spring depths, low interest rates are hurting insurance business profits, and its Precision Castparts aircraft and industrial parts unit has projected thousands of losses to additional jobs.
Berkshire also bought back a record $ 9.3 billion of its underperforming stocks in the third quarter as Buffett was unable to find the huge acquisitions he wants to spur growth.
Buybacks totaled $ 16 billion from January through September, and Berkshire appeared to spend at least $ 2.3 billion more on share buybacks in October, as its share count plummeted.
“The market will be encouraged by buybacks,” said Cathy Seifert, analyst at CFRA Research with a “hold” rating on Berkshire. “Many companies have halted buyouts to conserve resources during the pandemic, but because Berkshire is not paying a dividend, the amount it is returning to shareholders is a bit pale.
Third-quarter operating income fell 32% to $ 5.48 billion, or about $ 3,488 per Class A share, from $ 8.07 billion a year earlier.
Berkshire’s net income, meanwhile, rose 82% to $ 30.1 billion, or $ 18,994 per Class A share, from $ 16.5 billion, or $ 10,119 per share.
The bottom line includes $ 24.8 billion in gains from investments such as Apple. That stock rose 27% in the third quarter and, at $ 111.7 billion, is by far Berkshire’s largest stock stock.
Berkshire may have sold Apple shares because the stake should have been a few billion dollars higher, based on previously disclosed stakes, if none were sold.
The bottom line is volatile because an accounting rule requires Berkshire to report gains and losses on its equity holdings even if it does not buy or sell.
The company posted a profit of $ 26.3 billion in the second quarter, but lost nearly $ 50 billion in the first quarter. He ended September with $ 145.7 billion in cash and cash equivalents.
Berkshire bought Precision for $ 32.1 billion in 2016 in its largest acquisition ever, but the company has been hit hard by the pandemic, including a $ 9.8 billion depreciation in the second quarter.
Precision’s third-quarter pre-tax profit fell 80% and expects to lose 40% of its workforce by the end of 2019.
This equates to around 13,400 jobs, which is 3,400 more than what Berkshire previously revealed was lost.
Although Berkshire did not take any major depreciation in the third quarter, he said they may be needed in the fourth quarter if the impact of the pandemic turns out to be worse than expected.
Profit from insurance operations fell 58% to $ 802 million, reflecting lower results at its auto insurer Geico, losses from Hurricanes Laura and Sally and lower investment income from the drop interest rates.
Geico gave drivers $ 2.5 billion in credit on policy renewals earlier this year, and Berkshire said accounting for those credits would likely hurt underwriting results through March 2021.
Year-over-year profit fell 8% at BNSF Railroad, reflecting lower shipping volumes.
Results improved in Berkshire’s energy business, and profits from its real estate brokerage more than doubled as low interest rates pushed more people to buy homes.
The pandemic also increased the revenue of kitchen tool maker Pampered Chef, but See’s Candies suffered a significant drop in revenue.
Reporting by Jonathan Stempel in New York; edited by Jason Neely, Diane Craft and Grant McCool
Original © Thomson Reuters