Warren Buffett
Gerry Miller | CNBC
Warren Buffett’s Berkshire Hathaway on Saturday reported a fall in first-quarter earnings as the conglomerate was not immune to a slowdown in the U.S. economy.
The company’s net income was $5.46 billion, down more than 53% from $11.71 billion in the same period last year.
Berkshire’s operating profits — which include profits from the conglomerate’s myriad businesses like insurance, railroads, and utilities — were flat year over year at $7.04 billion. This comes amid a sharp decline in the company’s insurance business; Revenue from the segment fell nearly 94% to $47 million from $764 million in the year-ago period.
Revenue from Berkshire’s manufacturing, services and retail segments rose 15.5% to $3.03 billion for the quarter, while revenue from railroads and utilities rose slightly.
Those operating results came as the US economy contracted in the first quarter for the first time since the start of the Covid-19 pandemic.
The company also suffered a major slump in its investments, reporting a $1.58 billion loss amid a broader market decline. Of course, Buffett always advises shareholders to ignore these quarterly investment swings.
“The level of investment gains (losses) in any given quarter is typically meaningless and provides net earnings per share figures that can be highly misleading to investors with little or no knowledge of accounting regulations,” Berkshire said in the release from Saturday.
Berkshire’s share buybacks also slowed to $3.2 billion from $6.9 billion in the fourth quarter of 2021 as the company was the most active in deals in its most recent quarter.
In late March, the company announced that it had agreed to buy insurer Alleghany for $11.6 billion — Buffett’s largest deal since 2016. Berkshire also announced a stake in oil giant Occidental Petroleum, which now has more than $7 billion, along with a position in HP Inc’ now valued at more than $4.5 billion.
Despite the difficult environment, Berkshire has been a stellar investment this year. The conglomerate’s Class A shares are up more than 7% for the year, outperforming the S&P 500, which fell 13.3% in 2022. Although the company was down from the fourth quarter, the company still ended the first quarter with a massive cash position of $106.3 billion.
Zoom In IconArrows pointing outwards
The company’s latest quarterly earnings come as thousands flock to Omaha, Nebraska, for Berkshire’s annual meeting, where Buffett and Vice Chairman Charlie Munger will answer questions from shareholders. (CNBC will be hosting the exclusive live stream Saturday starting at 9:45 a.m. ET.)
Some of the topics Berkshire shareholders want to discuss with the two are their market prospects — given recent inflationary pressures and rising interest rates — and more clarity on the company’s succession plan.
Watch all coverage of the CNBC Berkshire Hathaway Annual Meeting here.