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Stock Analyst Update

Berkshire Bounces Back in Q1 on Solid Operating Results

Revenue, which includes unrealized and realized gains/losses from Berkshire's investments and derivatives portfolios, increased significantly.

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With wide-moat-rated Berkshire Hathaway (BRK.B) (BRK.A) reporting stronger first-quarter results than we had been forecasting, we may need to reassess our $440,000 ($293) per Class A (B) share fair value estimate. That said, a lot of this will be driven by our ability to uncover tidbits of information related to the lasting impacts that the coronavirus pandemic could have on Berkshire's operating subsidiaries, which would allow us to make more informed projections for the firm's businesses.

First-quarter revenue, which includes unrealized and realized gains/losses from Berkshire's investments and derivatives portfolios, increased significantly to $70.3 billion (from negative $9.0 billion in the prior year's period). Excluding the impact of investment and derivative gains/losses and other adjustments, first-quarter operating revenue increased 5.4% to $64.6 billion. Operating earnings, exclusive of the impact of investment and derivative gains/losses, increased 19.5% year over year to $7.0 billion during the March quarter. When including the impact of the investment and derivative gains/losses, operating earnings increased significantly to $11.7 billion (from negative $49.7 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 1.8% sequentially to $292,175 (from $287.031 at the end of December), slightly below our forecast of $294,207. The company closed out the March quarter with $141.4 billion in cash and cash equivalents, up from $138.3 billion at the end of last year. This left Berkshire with an estimated $116.7 billion in dry powder that could be committed to investments, acquisitions, and share repurchases. The company repurchased $6.6 billion of common stock, spent $47 million on bolt-on acquisitions, and was a net seller of equities during the March quarter. 

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Greggory Warren does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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