Industrials
Buffett Watch: Why Earnings Fell at Berkshire Hathaway, but Book Value Rises in 2015
August 7, 2015 5:43 pm
Last Updated: August 8, 2015 7:39 am
Berkshire Hathaway Inc. (NYSE: BRK-A) has issued its second-quarter earnings release for 2015. The conglomerate under Warren Buffett has earnings that are almost always very hard to analyze on apples-to-apples basis. There are also very few analysts that will cover it. The reason for difficult comparisons and a lack of coverage is far from a lack of interest — there are just too many moving parts. And Team Buffett has warned on numerous occasions that it is the quarterly book value that should matter the most.Source: courtesy of WhiteHouse.gov
Berkshire Hathaway pointed out that, since the beginning of the year, Berkshire’s shareholder equity has increased $5.9 billion and its book value per Class A equivalent share was up by 2.4% to $149,735 per share. The company’s insurance float at June 30, 2015 was $85.1 billion. For a comparison to the first quarter book value, Berkshire Hathaway’s book value per Class A equivalent share had increased by 0.5% since the end of 2014 to $146,963 as of March 31, 2015.
Approximately 58% of the aggregate fair value of equity investments was still concentrated in just four public companies. That is down from 59% at the end of 2014, and the equity values were listed as follows:
American Express Co. (NYSE: AXP) was valued at $11.8 billion, down from $14.1 billion American Express value at the end of 2014, likely due to AmEx performance being poor.
Wells Fargo & Co. (NYSE: WFC) was valued at $27.6 billion, above the $26.5 billion value for Wells Fargo at the end of 2014.
International Business Machines Corp. (NYSE: IBM) was valued at $12.9 billion, up from the $12.3 billion at the end of 2014, but likely due to adding more IBM shares.
Coca-Cola Co. (NYSE: KO) was valued at $15.7 billion, down marginally from the $16.9 billion at the end of 2014.
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The company’s filing showed for its “insurance and other” a June 30 cash balance of $60.394 billion, up from $57.974 billion a year ago. Also shown was that the value of Berkshire Hathaway’s investments in equity securities was $110.776 billion, down from $115.529 billion a year earlier.
Operating earnings came to $3.89 billion in the second quarter, down from $4.33 billion a year ago. Gains from investments fell to $236 million, from $1.96 billion a year ago. Buffett’s crew also lost a sum of $113 million from derivatives in the second quarter, down from a gain of $101 million a year earlier. The total combined revenues grew to $51.368 billion in the second quarter, versus $49.762 billion in the second quarter of 2014.
If you add up the investment income and the operating income from the conglomerate structure, Berkshire Hathaway made $4.01 billion in net earnings, down from $6.395 billion a year earlier.
This generated operating earnings Class A common share of $2,367, versus $2,634 per share a year ago. After the investments and derivatives, the net income per Class A common share was $2,442 (versus $3,889 a year ago).
Berkshire saw income go negative in the insurance underwriting to -$38 million, versus a gain of $411 million last year. The insurance-investment income fell to $977 million from $1.131 billion. And the non-insurance businesses earnings rose to $3.144 billion from $2.835 billion.
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After closing at $215,462.77 for the A shares, Berkshire Hathaway has a range of $193,570.00 to $229,374.00 over the past 52-weeks.
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