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By Trevor Hunnicutt
NEW YORK (Reuters) – The conglomerate led by billionaire Warren Buffett, Berkshire Hathaway Inc., said Saturday that its quarterly operating profit had doubled, as its insurance business helped prevent hurricanes and reduce taxes.
The solid result gives Buffett more money even as the well-known "value" investor looking for good deals admitted he was struggling to find the place to use that income and bought $ 928 million worth of shares from his own company in recent months. quarter.
Operating profit in the third quarter doubled to $ 6.88 billion from $ 3.44 billion a year earlier, and higher than the $ 6.11 billion expected by Wall Street, according to IBES data of Refinitiv.
The Company's insurance business was aided by the reduction in the estimated liability for P & C insurance in previous years and the reduction of taxes. The previous year, it included significant losses due to three US hurricanes and an earthquake in Mexico.
Revenues from insurance sales were $ 441 million in the third quarter compared to a loss of $ 1.4 billion for the same period last year.
"This is absolutely one of the biggest quarterly results ever published by any US company," said Bill Smead, managing director of Smead Capital Management, a Berkshire shareholder.
According to Berkshire, third-quarter net income increased more than 355% to $ 18.5 billion, although this reflects a new accounting rule requiring it to report unrealized gains on investments with earnings. Buffett said the rule could lead to "crazy and capricious" results and could mislead investors, who should instead look for operating profit.
Berkshire's effective tax rate for the third quarter was 19.2%, compared to 25.3% for the same period the previous year, as a result of a reduction in the tax rate. Corporate taxation that President Donald Trump promulgated last December. The results published by many US companies have been skewed by the impact of the law.
More than $ 100 million to spend
The insurance provides a cash flow that Berkshire can invest worldwide. Floating premiums, or insurance premiums collected prior to claim settlement and contributing to Berkshire's growth financing, were $ 118 billion. The company has $ 103.6 billion in cash, short-term treasury and similar investments.
Buffett's last major acquisition dates back to January 2016. Berkshire paid $ 32.1 billion to Precision Castparts, an aircraft parts manufacturer. In July, the company announced a relaxation of its policy, preventing Buffett from buying back its shares at current prices.
Berkshire is based in Omaha, Nebraska, and has more than 90 companies in the insurance, chemicals, energy, food and retail sectors, industrial parts, railways and others.
Their daily activities are overseen by Greg Abel and Ajit Jain, whom investors perceive as a possible successor to 88-year-old Buffett as general manager. Buffett and 94-year-old Charlie Munger, vice-chairman of the board of directors, take charge of the main capital allocation decisions.
Berkshire's profits have improved in each of its major business units. Their results painted the picture of a US economy that continues to grow, but faces rising costs, in part because of the imposition of tariffs by the Trump administration. In its construction products and its grocery and restaurant operations, for example, Berkshire announced higher fuel and raw material costs, hurting profits.
However, at Burlington Northern Santa Fe LLC, the Berkshire railway company, they were able to raise their prices as more and more companies move by rail because of the contraction of supply on the railways. trucking market.
Berkshire warned that insurance losses due to Hurricane Michael are currently estimated at between $ 350 million and $ 550 million for the fourth quarter.
SUB-PRICE?
Class A shares of Berkshire closed Friday at $ 308,411.01 per share, generating a total return of 3.6% for the year, a little ahead of the 3.4% return of the S & P 500. And the company's book value per Class A share, reflecting assets less liabilities and a preferred measure of Buffett's growth, stood at $ 228,712 on September 30, a higher increase at $ 217,677 a quarter ago.
Among his favorite investments, Buffett engulfed shares of Apple Inc. Berkshire's stake in Apple was worth $ 57.6 billion at the end of the last quarter, up from $ 47.2 billion at the end of June.
Apple's shares fell nearly 7% on Friday, bringing its market value to less than $ 1 trillion after announcing lower-than-expected sales for the holiday quarter and fueled the nerves of sales. IPhone, announcing that he would no longer publish these figures.
Steven Check, chairman of Berkshire shareholder Check Capital Management Inc., said Berkshire's redemptions bode well.
"It makes sense to me, because stocks traded at higher valuations for most of the quarter than they were bought," said Check.
"This again confirms what we have known for a long time, namely that stocks have been undervalued."
(Report by Trevor Hunnicutt, edited by Jennifer Ablan and James Dalgleish)
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