Berkshire Earnings Key Takeaways: Strong Profit, No Buybacks, and a Falling Stock

Warren Buffett’s Berkshire Hathaway was out with its earnings report on Saturday. (Photo by Alex Wong/Getty Images)

Berkshire Hathaway’s second-quarter earnings report released Saturday included more than just profit-and-loss figures that should be of interest to investors. The stock is dropping.

Here are some key takeaways: The operating earnings were better than they looked due to one-time, noncash currency losses as the company saw profit gains at some of its key businesses. Other highlights: The company bought no stock in the period, continuing a year-long trend, and again was a net seller of equities.

Berkshire B shares were down 3.1% at $458.39 in early trading.

Berkshire took a $3.8 billion noncash write-down of its more than 25% investment stake in Kraft Heinz , but that impairment isn’t significant—it’s merely aligning the new carrying value of $8.4 billion with the market value of the stock.

Reported operating profit after taxes was down 4% to $11.2 billion in the period but excluding currency swings related to the value of Berkshire’s sizable amount of yen debt outstanding, earnings were up 8% to $12 billion in the second quarter, Barron’s estimates.

Berkshire is on course to generate about $45 billion of after-tax operating profit this year—a figure that excludes changes in the value of its investments, which muddies overall reported earnings.

Looking at key divisions, the Burlington Northern Santa Fe railroad, whose margins have lagged behind peers, had a 20% gain in operating income, while profits gained 7% at the company’s utility business, Berkshire Hathaway Energy. Insurance underwriting profit fell 12% but was a strong $2 billion.

“Despite little activity on the capital allocation front, Berkshire’s key businesses produced generally solid profitability, and far better than is being generally reported,” wrote investor Chris Bloomstran on X. He heads Semper Augustus Investments and closely follows the company

Berkshire stock could react favorably to the news on Monday. The shares are down about 12% since the company’s annual meeting on May 3 after CEO Warren Buffett’s announcement that he would step down at year end as CEO while remaining chairman. The Class A shares finished at $711,480 on Friday while the B stock ended at $472.84.

Here are some other important takeaways from the report:

No stock buybacks. Berkshire didn’t repurchase shares in the second quarter and didn’t buy any in the first three weeks of July, according to our analysis of the share count in the 10-Q released Saturday. Berkshire hasn’t bought any of its own stock since May 2024. That’s a sign that Buffett doesn’t view the stock as cheap.

The stock’s valuation has contracted from the May peak. Berkshire now trades for about 1.5 times book value—in line with the average of recent years—down from 1.8 times in May. It’s possible that buybacks resume in the current quarter.

Cash levels remain high. Berkshire ended the quarter with about $344 billion of cash and equivalents on June 30. Adjusting for the timing of some Treasury bill purchases in the first quarter, cash levels were up about $10 billion relative to March 31. That gives Berkshire plenty of wherewithal for a potential cash bid for railroad operator CSX now that Union Pacific has reached a deal with Norfolk Southern to create a transcontinental railroad.

Berkshire continued to be a net seller of stocks—an indication that Buffett isn’t enamored of the equity market.

The company bought about $4 billion of equities and sold around $7 billion for net sales of $3 billion in the second quarter, according to the 10-Q. That followed net sales of about $1.5 billion in the first quarter and over $130 billion in 2024 when Berkshire slashed its stake in Apple by about two-thirds to 300 million shares.

Other noteworthy items were a warning that the One Big Beautiful Bill Act’s curbs on tax credits for renewable energy, could impact the utility business, which has received significant federal tax credits for wind energy installation. Berkshire has one of the largest wind energy portfolios in the country.

The Kraft Heinz write-down could mean that Berkshire’s equity investment in Occidental Petroleum will be next. Berkshire carries the Oxy investment for $16.5 billion, about $4 billion above its current market value. Berkshire owns over 25% of the energy company.

Write to Andrew Bary at andrew.bary@barrons.com