Berkshire Hathaway shows sign of recovery in its Q2 filings

Summary 

• Berkshire Hathaway’s operating income for the second quarter shot up by 21% to US$6.69 billion.
• The conglomerate repurchased a massive US$6 billion worth of its own stock in the second quarter, totalling to US$12.6 billion in the last six months.
• On Friday, Berkshire’s class B share price shot up by 1.93% to US$285.63 a share, breaking out of its one-and-a-half-month range.

Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.B) has witnessed a decent recovery in operating income as its host of energy and railroad businesses benefitted from the reopening of the economy. As a result, the conglomerate’s operating earnings for the second quarter stood at US$6.69 billion, a healthy 21% increase over the last year’s earnings of US$5.51 billion.

Overall earnings, which reflect the conglomerate’s fluctuating equity investments, shot up 6.8% over the last year to US$28 billion in the second quarter. The cash levels with the company were steadily maintained at US$144.1 billion, near a record despite the company’s gigantic buyback program.   

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Berkshire acknowledged that the quarterly performance was a stellar one as the conglomerate is bouncing back from a low base a year ago but is still unsure when results will indeed return to normal.

Warren Buffett, Chairman and CEO of Berkshire Hathaway, was engaged in buying back Berkshire shares aggressively instead of making sizable acquisitions. The conglomerate repurchased a massive US$6 billion worth of its own stock from the market in the second quarter, totalling to US$12.6 billion in the last six months. Last year, Berkshire repurchased a record US$24.7 billion of its own stock.

As the economy continues to revert to life from the COVID-19 pandemic with more commodities and goods being shipped around the country, Berkshire is confident of a recovery in Burlington Northern Santa Fe railroad’s earnings. It said earnings for utilities, railroads, and energy surged more than 27% to US$2.26 billion in the reported period, compared to a year ago. Berkshire’s other businesses, including paint-maker and homebuilders, are also seeing a recovery.

The conglomerate said that the COVID-19 pandemic had adversely affected almost all of its companies during 2020, particularly during the second quarter, although the effects varied significantly. It also said that the extent of the damage by the pandemic over longer terms is difficult to estimate at this time reasonably.

At the peak of the COVID-19 crisis, Berkshire witnessed a massive slowdown, with its operating income dropping 10% in the second quarter of 2020 YoY and nosediving almost 30% in the next quarter.

Read More: Did You Know About Warren Buffetts’s Berkshire Hathaway Portfolio?

Stock Performance

The results came as the conglomerate’s stock surged to an all-time high during the reported period, wiping out all of its 2020 losses. On Friday, in anticipation of good results that came out on Saturday, Berkshire’s class B share price shot up by 1.93% to US$285.63 a share, breaking out of its one-and-a-half-month range and closed at the highest level since 15 June 2021.