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Berkshire Hathaway (BRK.B) Q3 Earnings Rise Year Over Year

Berkshire Hathaway Inc. (BRK.B) delivered third-quarter 2022 operating earnings of $7.8 billion, which increased 20.1% year over year. The increase was driven by higher earnings at Railroad, Utilities and Energy, as well as Manufacturing, Service and Retailing businesses.

Berkshire Hathaway Inc. Price, Consensus and EPS Surprise

 

Berkshire Hathaway Inc. Price, Consensus and EPS Surprise
Berkshire Hathaway Inc. Price, Consensus and EPS Surprise

Berkshire Hathaway Inc. price-consensus-eps-surprise-chart | Berkshire Hathaway Inc. Quote

Behind the Headlines

Revenues increased 9% year over year to $76.9 billion, attributable to higher insurance premiums earned, sales and service revenues, leasing revenues, interest, dividend and other investment income in Insurance and Other as well as higher freight rail transportation revenues and energy operating revenues in Railroad, Utilities and Energy. The figure was higher than our estimate of $74.9 billion.

Costs and expenses increased 7.3% year over year to $68 billion, largely due to an increase in insurance losses and loss adjustment expenses, cost of sales and services, cost of leasing, freight rail transportation expenses, Utilities and energy cost of sales and other expenses and Interest expense. The figure was higher than our estimate of $67.3 billion.

Segment Performance

Berkshire Hathaway’s Insurance and Other segment revenues increased 8.5% year over year to $62.7 billion in the reported quarter on the back of higher insurance premiums earned, sales and service revenues, leasing revenues, interest, dividend and other investment income. The figure was higher than our estimate of $61.7 billion.

Insurance underwriting loss widened to $962 million from $784 million incurred in the year-ago quarter. Losses from Hurricane Ian, increases in private passenger automobile claims frequencies and severities weighed on the performance.

Railroad, Utilities and Energy operating revenues increased 11.1% year over year to $14.2 billion. The figure was higher than our estimate of $13.2 billion.

Pre-tax earnings of Railroad decreased 7% year over year to $1.9 billion due to lower freight volumes and higher fuel and other operating costs, partially offset by higher revenue per car. However, it was higher than our estimate of $1.4 billion.

Pre-tax earnings of Utilities and Energy decreased 3.9% year over year to $1.3 billion as a result of higher energy cost of sales, energy operating expense and interest expense.

Total revenues at Manufacturing, Service and Retailing increased 8.6% year over year to $42.1 billion. Pre-tax earnings increased 18.3% year over year to $4.2 billion.  Solid customer demand for products and services was weighed down by higher materials, freight, labor and other input costs.

Financial Position

As of Sep 30, 2022, consolidated shareholders’ equity was $463.7 billion, down 9.9% from the level as of Dec 31, 2021. At quarter-end, cash and cash equivalents were $32.6 billion, down 63% from the level at 2021 end.

Berkshire exited the third quarter of 2022 with a float of about $150 billion, 2% higher from the figure at year-end 2021. Cash flow from operating activities totaled $31.6 billion in the first nine months of 2022, down 14.6% from the year-ago period. Berkshire Hathaway bought back shares worth $5.2 billion in the first nine months of 2022.

Zacks Rank

Berkshire currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Performance of Other Insurers

Of the insurance industry players that have reported third-quarter results so far, The Travelers Companies TRV and RLI Corporation RLI beat the respective Zacks Consensus Estimate for earnings, while The Progressive Corporation PGR missed the mark.

Travelers’ third-quarter 2022 core income of $2.20 per share beat the Zacks Consensus Estimate by 24.3% but decreased 15.4% year over year.  Total revenues increased 6.8% from the year-ago quarter to $9.4 billion and beat the Zacks Consensus Estimate by 2.5%.

Net written premiums increased 110% year over year to $9.2 billion. Underwriting gain of $115 million increased 53.3% year over year in the reported quarter. The combined ratio improved 40 bps year over year to 98.2.

RLI’s third-quarter 2022 operating earnings of 50 cents per share beat the Zacks Consensus Estimate by 51.5% but declined 23.1% from the prior-year quarter. Operating revenues of $312.7 million were up 15.3% year over year but missed the Zacks Consensus Estimate by 1.3%.

Gross premiums written increased 13.3% year over year to $403.8 million. Underwriting income of $8.8 million decreased 35.8% while the combined ratio deteriorated 240 bps year over year to 97.

Progressive’s earnings per share of 49 cents missed the Zacks Consensus Estimate of $1.24 as well as our estimate of $1.38. The bottom line, however, improved more than threefold from 14 cents earned in the year-ago quarter.

Net premiums written were $13 billion in the quarter, up 5% from $11.7 billion a year ago but missed our estimate of $14.2 billion. The combined ratio — the percentage of premiums paid out as claims and expenses — improved 120 bps from the prior-year quarter’s level to 99.2.


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