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Stock Analyst Update

Unrealized Investment Gains Lift Berkshire's 1Q Results

First-quarter revenue increased 3.8% to $60.7 billion, more or less in line with our forecast.

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Wide-moat-rated  Berkshire Hathaway (BRK.A)/(BRK.B) released first-quarter results this morning ahead of the company's annual meeting that were more or less in line with our expectations. First-quarter revenue, which now includes unrealized (as well as realized) gains/losses from the firm's investments and derivatives portfolios, increased 60.5% year over year to $81.0 billion. Excluding the impact of investment and derivative gains/losses, first-quarter revenue increased 3.8% to $60.7 billion, more or less in line with our near- to medium-term forecast calling for low- to mid-single-digit top-line growth from the firm's operating businesses.

Net operating earnings (excluding the impact of investment and derivative gains/losses) rose 5.0% year over year to $5.6 billion. When including the impact of the investment and derivative gains/losses, Berkshire's net earnings rose to $21.7 billion during the quarter, up significantly from a negative $1.1 billion in the year-ago period. That said, with Kraft Heinz having yet to release financials for both 2018 and the first quarter of 2019, Berkshire does not yet have the necessary financial information necessary to determine its share of the earnings of Kraft Heinz for the quarter (which could add to or detract from reported results).

Book value per Class A equivalent share, which (in our mind) still serves as a decent proxy for measuring changes in Berkshire's intrinsic value, recovered from the beating it took during the fourth quarter, increasing 6.0% by our estimates to $224,950 (from $212,503 at the end of 2018). The company closed out the first quarter of 2019 with $114.2 billion in cash and cash equivalents, up from $111.9 billion at the end of December, with Berkshire (by our estimates) having at least $85 billion in dry powder available for acquisitions, investments, share repurchases, and dividends. During the first quarter of 2019, Berkshire repurchased shares of Class A and B common stock for $1.7 billion.

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