Berkshire Hathaway earnings fell in the third quarter, the company reported on Saturday, in the first set of results published since Greg Abel took over as chief executive from Warren Buffett. Operating earnings dropped 5.8 percent from a year earlier to $12.7 billion, while net earnings fell 28 percent to $22.11 billion.
Revenue rose 11 percent to $105.65 billion, according to the company’s third-quarter report, but the weaker profit figures show the sprawling conglomerate facing pressure across several of its businesses. The results were released on Saturday, November 7, and were reported by Reuters and the Associated Press.
The quarter also brought a sharp step-up in share buybacks. Berkshire spent $9.6 billion repurchasing its own stock during the period, one of the largest quarterly buyback totals in the company’s history, even as its operating profit declined.
What the Berkshire Hathaway earnings show
Operating earnings are the measure Buffett has long told investors to watch, because they strip out the swings in the value of Berkshire’s huge stock portfolio. On that measure, the third quarter was softer than the same period last year, with earnings falling to $12.7 billion from about $13.5 billion a year earlier.
Net earnings, which include investment gains and losses, fell more sharply, dropping 28 percent to $22.11 billion. That figure reflects the ups and downs of Berkshire’s equity holdings as much as the performance of its operating businesses, which range from railroads and utilities to insurance, manufacturing and retail.
Revenue told a different story. Sales climbed 11 percent to $105.65 billion, suggesting that demand across Berkshire’s businesses held up even as profit margins came under pressure. The gap between rising revenue and falling profit points to higher costs squeezing the bottom line.
Buybacks take center stage
The $9.6 billion spent on share repurchases was the standout figure in the report. Berkshire has historically been cautious about buybacks, with Buffett insisting the company would only buy its own shares when they were priced below their intrinsic value.
The scale of the third-quarter purchases suggests Abel and his team saw value in the stock at current prices, and it signals that returning cash to shareholders will remain a central part of Berkshire’s strategy under the new chief executive. Buybacks reduce the number of shares in circulation, lifting earnings per share for the investors who remain.
For long-term shareholders, the buyback program is also a statement of confidence. Berkshire is sitting on an enormous cash pile, and the decision to deploy nearly $10 billion in a single quarter indicates management believes its own shares are among the best uses of that money.
Abel’s first quarter in charge
The results mark the first earnings release since Abel succeeded Buffett as chief executive, a transition that ended one of the most closely watched leadership successions in American business. Buffett built Berkshire from a struggling textile mill into a conglomerate worth hundreds of billions of dollars over six decades.
Abel, who previously ran Berkshire’s energy businesses, inherits a company with a vast and diverse portfolio, including the BNSF railroad, Geico insurance, and major stakes in public companies. Investors have been watching closely for signs of how he will run the business differently from his predecessor.
The third-quarter figures offer no dramatic break with the past. The emphasis on operating earnings, the discipline on buybacks, and the refusal to chase growth at any price all look familiar. But the size of the buyback program hints that Abel may be willing to deploy Berkshire’s cash more aggressively than Buffett did in his final years.
What the results mean for investors
Berkshire’s earnings are often read as a barometer of the wider American economy, because its businesses touch so many parts of it, from freight rail and homebuilding to insurance and consumer goods. A softer quarter for Berkshire can signal that economic conditions are cooling, even if the company’s own scale makes it hard to draw simple conclusions.
The decline in operating earnings follows a period in which several of Berkshire’s businesses have faced headwinds, including higher costs and softer demand in parts of the economy. Insurance results, which can swing sharply from quarter to quarter, also play a large role in the company’s overall performance.
For investors, the key question is whether the third quarter marks a temporary dip or the start of a weaker trend. Berkshire’s businesses are diversified enough that a soft patch in one area is often offset by strength elsewhere, and the company’s balance sheet gives it room to weather downturns.
What to watch next
Attention will now turn to how Abel communicates with shareholders in the months ahead, including whether he maintains Buffett’s tradition of detailed annual letters and the Omaha shareholder meeting. The buyback pace will also be watched closely as a signal of how Abel values the stock.
The fourth quarter will show whether operating earnings recover, and whether the company continues to repurchase shares at the same pace. With the stock market unsettled after the midterm elections, Berkshire’s next moves will be scrutinized for what they say about the outlook for American business.
For now, the message from the third quarter is mixed: revenue is growing, profits are under pressure, and the new chief executive is putting Berkshire’s cash to work buying back stock.