Andrew Bary
Investors will be focused on many things beyond the headline profit figures when Berkshire Hathaway reports its first-quarter earnings on Saturday morning.
How much money Warren Buffett's company earned is important to investors, but several other questions matter too, both for Berkshire and for the companies it invests in. On the list are the company's stock repurchases in the period, cash levels, the situations at Berkshire units Geico and Burlington Northern Santa Fe, and any changes in the company's major equity holdings, notably Apple.
The earnings will be released at around 8 a.m. Eastern as Berkshire's annual meeting gets under way in Omaha, Neb. Berkshire may be the only company in the S&P 500 that releases its quarterly results on a Saturday. That reflects Buffett's view that investors should have time to digest the report before trading the stock on Monday.
Berkshire's operating profits, excluding changes in the value of the company's $360 billion equity portfolio, are expected to increase 21% to $6,702 per Class A share, according to the FactSet consensus estimate.
UBS analyst Brian Meredith is more bullish. He recently lifted his first-quarter estimate to $7,356 per Class A share from $6,979, a shift driven by what he thinks will be better results at Geico, Berkshire's auto insurance unit, and higher rail shipments at Burlington Northern Santa Fe.
Berkshire's Class A stock, which finished Tuesday at $599,500, down 1%, has risen 10% this year, topping the total return of about 6% on the S&P 500. But the shares are down from a late February peak of $647,000. Meredith raised his target for the stock price to $722,234 from $715,000.
The earnings always get attention, but CEO Warren Buffett tells investors to look at the profits over longer periods to gauge financial trends at the company. Berkshire's buybacks are always a focal point because they offer a read on Buffett's view on the stock, given that he determines the pace of repurchases.
The first-quarter figure could come in at around $3 billion, Barron's estimates, based on buybacks of $2.3 billion in the period through March 8. (We calculated those repurchases based on share count information in the Berkshire proxy.) A $3 billion figure would be above the $2.2 billion of buybacks in the fourth quarter and put the conglomerate on track to surpass the $9 billion of stock repurchased in all of 2023.
The company's 10-Q filing with the Securities and Exchange Commission, which is also due for release on Saturday morning, will offer information on Berkshire's largest equity holdings. Investors are probably most interested in whether Berkshire's big holding in Apple continued to decline in the period.
Berkshire sold 10 million shares of the iPhone maker in the fourth quarter, reducing its stake to 905 million shares now worth more than $150 billion. Apple stock fell about 10% in the first quarter.
The 10-Q will also indicate whether Berkshire's appetite for stocks increased in the first quarter. The company was a net seller of $24 billion of stocks during 2023.
Berkshire's holdings of cash and equivalents, mostly U.S. Treasury bills, rose during 2023 and hit a record $168 billion at year-end. The cash levels could reach a new high on March 31.
Berkshire's insurance divisions had a strong 2023, helped by sharply higher premiums in the property and casualty sector. Underwriting profits hit $5.4 billion after taxes, compared with a loss of $30 million in 2022. Investors will be looking to see whether the favorable trends continued into the first quarter.
Geico had a big profit turnaround in 2023 but Barron's estimates that came at the expense of a loss of about 10% of its policies. UBS's Meredith sees strong underwriting results for Geico in the first quarter and a slight loss in policies relative to the fourth quarter.
Book value is expected to rise about 2% sequentially to about $397,000 per Class A share, based on estimates from Meredith and Edward Jones analyst Jim Shanahan. The stock now trades at 1.5 times that book value estimate, above its four-year average of 1.4 times.
Write to Andrew Bary at andrew.bary@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
May 01, 2024 08:34 ET (12:34 GMT)
Copyright (c) 2024 Dow Jones & Company, Inc.
Comments