Berkshire Hathaway’s Q1 Results Marred By Issues At Geico

Published on

Morningstar Equity Analyst Greggory Warren: Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B)’s Q1 Results Marred by Issues at Geico; Stock Investments Outpace Share Repurchases

Morningstar published its updated analyst note for Berkshire Hathaway after yesterday’s annual meeting.

With wide-moat Berkshire Hathaway reporting first-quarter results that were more or less in line with our forecasts, we are leaving our $550,000 ($367) per Class A (B) share fair value estimate in place. First-quarter reported revenue, which includes unrealized and realized gains/losses from Berkshire’s investments and derivatives portfolios, declined 3.2% to $68.0 billion from $70.3 billion in the prior year’s period). Excluding the impact of investment and derivative gains/losses and other adjustments, first-quarter operating revenue increased 9.6% to $70.8 billion.

Get The Full Series in PDF

Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues.

Q1 2022 hedge fund letters, conferences and more

Berkshire Hathaway's Earnings

Operating earnings, exclusive of the impact of investment and derivative gains/losses, increased 0.3% year over year to $7.0 billion during the March quarter. While most of the company's segments posted solid operating earnings growth, the insurance segment was dragged down by larger than normal increases in both the frequency and severity of claims at Geico, which left underwriting results in negative territory. When including the impact of the investment and derivative gains/losses, reported operating earnings declined 53.4% to $5.5 billion from $11.7 billion in the prior year's period.

Book value per share, which still serves as a decent proxy for measuring changes in Berkshire's intrinsic value, increased 0.6% sequentially to $344,572 (from $342,622 at the end of December 2021), slightly above our forecast of $338,339. The company closed out the March quarter with $106.3 billion in cash and cash equivalents, down from $146.7 billion at the end of last year. This left Berkshire with an estimated $71.0 billion in dry powder that could be committed to investments, acquisitions, and share repurchases. During the March quarter, the company invested (net of sales) $41.4 billion in equity securities, which included Occidental Petroleum and Chevron (but likely not HP), and also repurchased $3.2 billion of its own common stock. We welcome this meaningful reduction of the company's cash balances.