(Reuters) – Warren Buffett’s Berkshire Hathaway Inc. reported lower quarterly operating results on Saturday and said the coronovirus pandemic could lead to further losses, even as gains in stocks such as Apple Inc. totaled more than 30 billion. Made a profit.
Some Berkshire operating businesses have reborn from the depths of their spring, and analysts were encouraged that revenue had fallen only 3% from a year earlier.
But COVID-19, hurricanes and low interest rates hurt profits from the insurance business, including Geo Auto Insurers, and the Precision CastParts Aircraft Parts Unit estimated thousands of additional job losses.
Berkshire also regained a record $ 9.3 billion of its underperforming stock in the third quarter, as Buffett could not achieve a major takeover of the 90-year-old billionaire.
The buyback traded a total of $ 16 billion from January to September, and appeared at least $ 2.3 billion in October, as Berkshire’s share count fell.
“The market will be encouraged by buybacks,” said Kathy Seifert, an analyst at CFRA Research with a “hold” rating on Berkshire. “Many companies withheld buybacks to conserve resources during the epidemic, although Berkshire has not paid the amount of the dividend as it is returning to shareholders’ sails.”
Third quarter operating profit fell 32% to $ 5.48 billion, or approximately $ 3,488 per Class A, from $ 8.07 billion a year earlier.
Net income grew 82% to $ 30.1 billion, or $ 18,994 per Class A share, from $ 16.5 billion, or $ 10,119 per share. Revenue totaled $ 63 billion.
New uses for cash
Berkshire gained $ 24.8 billion from investments such as Apple, whose stock rose 27% in the quarter and Berkshire, the largest stock holding at $ 111.7 billion, comprising a portfolio of 46%.
Nevertheless, it appears that Berkshire may have sold some Apple stock, as the stakes would have been a few billion dollars more, if none had been sold, based on previously stated bets.
The net results are volatile because an accounting rule requires Berkshire to report unrealized gains and losses on its shares. The company made a profit in the second quarter of $ 26.3 billion, but lost about $ 50 billion in the first quarter.
Despite the buyback, Berkshire ended the quarter with $ 145.7 billion in cash and equivalents.
The Omaha, Nebraska-based company has also found new ways to invest $ 6 billion in five Japanese trading houses to spend cash and support the initial public offer of data storage company Snowflake Inc.
“It’s a good quarter, and I’m pleased with the level of cash deployment,” said Jim Shanahan, an analyst at Edward Jones with a “buy” rating in Berkshire. “If we have a second wave of epidemics, Buffett is still positioned to take advantage.”
Precision, which Berkshire bought for $ 32.1 billion in its largest acquisition in 2016, has been hit hard by the downturn in the aerospace industry in the second quarter when Berkshire took a $ 9.8 billion write-off.
Third-quarter pretax profit fell 80%, and Berkshire expects the unit to shed 40% of its workforce by the end of 2019.
This equates to about 13,400 jobs, or 3,400 more than Berkshire had previously revealed.
While Berkshire did not take any major third-quarter retdowns, it said the epidemic could force additional retriedowns.
Insurance profits fell by 58% to $ 802 million, reflecting lower income from investments due to lower premiums and declining interest rates on Geico, COVID-19, Hurricanes Laura and Sally.
Geico was given a $ 2.5 billion credit to drivers on policy renewals this year, and Berkshire said that the results of underwriting through March 2021 in accounting for those credits should hurt.
Profit on the BNSF railroad fell by only 8%, as cost cuts helped offset lower shipping versions. “When the revenue and volumes recover, it does well,” Shahnan said.
Results in Berkshire’s energy businesses improved, and profits on its real estate brokerage more than doubled as lower interest rates prompted more people to buy homes.
Reporting by Jonathan Stampel in New York; Editing by Jason Neely, Diane Craft and Grant McCool