Berkshire Operating Profits Rose 33% in Third Quarter. There Were No Stock Buybacks.

Berkshire Hathaway CEO Warren Buffett. (Johannes Eisele / AFP / Getty Images)

Berkshire Hathaway’s operating profits rose 33% in the third quarter to $13.5 billion after taxes, bolstered by strong insurance underwriting profits, as well as gains at the company’s railroad and manufacturing businesses.

The company bought back none of its own stock in the period, continuing a trend that began in May 2024.

Berkshire’s cash and equivalents continued to increase, rising to a record $381 billion at the end of September from $344 billion at the end of June, due in part to sizable sales of stock from the company’s equity portfolio.

Berkshire’s operating profits per share rose 33% year-over-year to about $9,376 per A share in the third quarter, Barron’s calculates, topping the FactSet consensus estimate by about 9%. Insurance underwriting profits tripled from the year-ago period to $2.4 billion after taxes in the third quarter, while earnings at the Burlington Northern Santa Fe railroad rose about 5% to $1.45 billion and gained 8% to $3.6 billion at the diversified manufacturing, service, and retailing segment.

Berkshire was a net seller of $6 billion of stocks in the third quarter, buying about $6.4 billion of equities and selling around $12.4 billion, according to Barron’s calculations based on information in the company’s third-quarter 10-Q report that was released Saturday morning.

It’s possible that Berkshire continued to pare its stake in Apple in the period. Berkshire didn’t disclose any sales of Apple, but there are some clues that it may have sold stock in the iPhone maker.

Berkshire generated $8.2 billion of realized investment gains in the third quarter. That ample gain relative to the size of the equity sales in the period would be consistent with a potential sale of Apple stock—and Berkshire had big gains in its Apple holding that totaled 280 million shares at the end of the second quarter.

Berkshire’s cost basis of its consumer stock holdings also fell in the third quarter, which would be consistent with Apple stock sales. Berkshire reduced its Apple stake by 20 million shares in the June quarter, after cutting it by about two-thirds in 2024.

Berkshire will disclose its Apple stake and its other equity holdings in a 13-F filing in mid-November.

In Berkshire’s insurance segment, the auto insurer Geico, had another strong quarter, generating pre-tax underwriting profits of $1.8 billion, but down from $2 billion in the year-earlier period. Berkshire appeared to benefit from the lack of major U.S. hurricanes in the third quarter as it posted reinsurance underwriting profits of about $900 million in the period against a loss of $300 million in the year-earlier period.

Berkshire’s total after-tax earnings of $30.8 billion in the third quarter were up 17% from the year-earlier period. This figure reflects both operating profits and investment gains. CEO Warren Buffett tells investors to focus on the operating profits, due to variability of investment gains from quarter to quarter.

The lack of stock buybacks in the third quarter is a mild disappointment to Berkshire investors. It indicates that Buffett doesn’t view the stock as cheaply valued; he has authority to repurchase stock for Berkshire when he views the shares as trading as a discount to his estimate of the stock’s intrinsic value “conservatively determined.”

Berkshire’s buyback drought continued into October with the company repurchasing no shares from Sept. 30 until Oct. 20, the date of the third-quarter 10-Q report, Barron’s estimates, based on share count information in the Berkshire 10-Q. Berkshire’s share count is about 1.438 million A shares with B stock converted into an equivalent amount of the A shares.

Berkshire stock has come under pressure since the company’s annual meeting in May, when Buffett said he would step down as CEO at the end of this year while remaining chairman.

The shares have lagged the S&P 500 by over 30 percentage points since the meeting on May 3. Some investors thought Berkshire might resume its buybacks given the stock’s drop of more than 10% since the annual meeting.

Berkshire A stock finished Friday at $715,740 and the B shares at $477.54—both up 5% so far this year and about 13 percentage points behind the S&P 500 index.

The reported Berkshire cash and equivalents of $381 billion on Sept. 30 are overstated, Barron’s calculates. The company had a liability at the end of the quarter of $23 billion for Treasury bill purchases, against no liability at the end of June when its cash levels were $344 billion.

Berkshire is a huge holder of T Bills, with $305 billion on its balance sheet at the end of September. Timing issues on Berkshire’s purchases at regular Treasury auctions of the securities relative to settlement dates can create liabilities. A better measure of cash levels at the end of September probably is about $359 billion, Barron’s estimates.

Berkshire’s book value stood at a record $485,000 per class A share at the end of September, up 4% from the June 30 figure, Barron’s calculates based on information on shareholder equity in the 10-Q. Berkshire stock now trades for just under 1.5 times its book value, down from a peak of 1.8 times in May and in line with the five-year average.

The 33% gain in Berkshire’s operating profits in the third quarter to $13.5 billion after taxes overstates the strength in its core business. Berkshire had a foreign currency gain of about $300 million in the period, against a loss of $1.1 billion in the third quarter of 2024. Those results were included in “other” income in its financial results.

When you adjust for the currency swing, Barron’s estimates that operating profits gained 17% in the third quarter to about $13.2 billion—still a solid showing, but not as good as the reported figure.

Berkshire has foreign currency debt mostly denominated in Japanese yen. Swings in the relationship between yen and the U.S. dollar create accounting gains and losses each quarter that aren’t reflective of core earnings power.

Berkshire’s investment income fell about 13% in the third quarter to $3.2 billion from the year-earlier period, due in part to lower short-term interest rates which depressed interest income on Berkshire’s big holdings of T Bills and other cash equivalents. There could be more downward pressure on interest income in the coming year if the Federal Reserve keeps cutting short-term interest rates.

Geico has been a focus for investors, as the auto insurer has generated sharply higher underwriting profits over the past year or so after a tough period for underwriting. The insurer, however, has shrunk over the past five years based on its policy count and now is growing again based on policies in force.

The company is spending more to back growth initiatives as expenses grew about $400 million year over year in the third quarter. Geico’s underwriting margin still was ample at 16% in the third quarter, significantly above more normal levels of close to 5%.

One reason that Berkshire stock has been under pressure in recent months is investor concern that property and casualty insurance rates for many types of risk are heading lower—and that current underwriting profitability is unsustainable.

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