^{Source: Forecasts based on the consensus of analysts from visible alpha}

Berkshire Hathaway (BRK.A) Financial Results: Analysis

Berkshire Hathaway, Inc. (BRK.A, BRK.B) announced results for the second quarter of fiscal 2022 well below analysts’ expectations. Earnings per share (EPS) were a loss of $29,754, compared to analysts’ estimate of a loss of $4,079. During the same period of 2021, Berkshire recorded positive EPS of $18,488.

Revenue for the second quarter of fiscal 2022 was $9.261 billion, down 90.4% year-over-year (YOY) and missing the estimate by 83.9%. Note that this turnover is the sum of operating income operating subsidiaries of Berkshire ($76.180 billion) and the pre-tax loss on investments and derivative contracts (-66.919 billion dollars). In the second quarter of fiscal 2021, those numbers were $69.114 billion and a gain of $27.394 billion, respectively, for a total of $96.508 billion.

In the second quarter of fiscal 2022, Berkshire Hathaway posted a net loss after tax of $53.038 billion on investments and derivative contracts. The company recorded a gain of $21.408 billion during the same period of 2021.

Operating profit, which excludes these gains, were $9.283 billion, compared to $6.686 billion in the same quarter of 2021. This is an improvement of 38.8% year-on-year and 35.2% above the estimate of $6.866 billion. The operating profit figures that Berkshire reports are calculated after income taxes and exclude profits attributable to Non-majority interests.

Berkshire spent about $1.0 billion to share buybacks (share buybacks) in the second quarter of fiscal 2022. This brought the total for the first half of 2022 to approximately $4.2 billion.

Over the past year, through August 5, 2022, Berkshire Hathaway shares have provided a full return 4.33%, outperforming the S&P 500 total return by -5.01%.

Operating profit of BRK.A

For many years, Chairman and CEO warren buffet urged investors to focus on Berkshire’s operating profits from its wholly-owned operating subsidiaries. These units encompass a wide range of industries, including insurance, railroads, utilities, and energy.

However, following recent changes in GAAP reporting rules, the quarterly report mark-to-market fluctuations in the value of Berkshire’s investment portfolio shall affect the company income statementa rule that Buffett criticized as introducing misleading volatility into the company’s reported financial results. A prime example is shown above, with Berkshire’s after-tax profits on its investment portfolio falling from a gain of $21.408 billion in the second quarter of fiscal 2021 to a loss of $53.038 billion in the second. quarter of fiscal year 2022.

Meanwhile, as shown above, operating income increased from $6.686 billion in the second quarter of fiscal 2021 to $9.283 billion in the second quarter of fiscal 2022, an improvement of 38, 8%. Improvements were recorded in Berkshire’s six main reporting segments, as detailed below.

• Insurance subscription profits increased from $376 million in Q2 2021 to $581 million in Q2 2022 (+54.5%).
• Income from insurance investments increased from $1.219 billion to $1.906 billion (+56.4%).
• Railways increased from $1.516 billion to $1.664 billion (+9.8%).
• Utilities and energy rose from $740 million to $766 million (+3.5%).
• “Other businesses,” which includes manufacturing, services and retail, rose from $3.004 billion to $3.249 billion (+8.2%).
• “Other” went from a loss of $169 million to a gain of $1.117 billion. This category primarily reflects foreign exchange gains and losses on non-US dollar denominated debt.

Berkshire Hathaway’s next earnings report for the third quarter of fiscal 2022 is scheduled for release on Saturday, November 5, 2022. The report for the same period of 2021 was released on November 6, 2021, the first Saturday of that month.