Berkshire Likely Had a Stellar Quarter. Stock Buybacks Are a Wild Card.

Berkshire-themed stickers on the exhibition floor during the 2024 Berkshire Hathaway annual shareholders meeting. (Dan Brouillette/Bloomberg)

Key Points

• Berkshire Hathaway’s third-quarter operating profits are projected to increase by over 20%, exceeding $12 billion, driven by strong insurance performance.
• Berkshire’s Class A shares have declined about 12% since May 2, underperforming the S&P 500’s 21% gain over the same period.
• Cash levels, which stood at $344 billion on June 30, are a focus for investors, with expectations they likely increased as of Sept. 30.

Berkshire Hathaway is expected to post stellar third-quarter results when it reports earnings on Saturday morning. Analysts have penciled in a 20%-plus gain in operating profits, helped by a light hurricane season.

But the size of the profit is just one point to watch. As is usual with Berkshire, investors will be focused on cash levels, investment activity, and any stock repurchases as they examine the results. The earnings report and 10-Q filing with the Securities and Exchange Commission are expected to be issued at the same time.

News of buybacks might come as the biggest surprise because Berkshire hasn’t repurchased any stock since May 2024. Any repurchases would be viewed favorably as a sign that CEO Warren Buffett views the stock as inexpensively valued.

It is possible that Berkshire bought back some stock in the period because the Class A shares dipped under $700,000 in August. The shares are now around $725,000.

Total cash levels stood at $344 billion on June 30. Investors will be interested to see if that huge figure increased in the period or if Berkshire found enough investment opportunities to reduce its cash holdings. The current betting is that cash levels likely were higher on Sept. 30.

Berkshire stock has come under pressure since the Berkshire annual meeting, when Buffett made the surprise announcement that he would step down as CEO at year-end while remaining chairman.

The Class A shares, down 1.3% Wednesday at $712,900, are off about 12% since May 2, the day before the annual meeting, while the S&P 500 has gained 21%. This marks one of the worst six-month periods of underperformance for Berkshire in decades. Berkshire now is up 4.7% this year, behind the index’s 18% return, including dividends.

Berkshire discloses its top five equity holdings in its 10-Q but no longer reports the dollar value of the investments. That will make it hard to determine if Berkshire sold more Apple and Bank of America stock in the third quarter.

Berkshire held 280 million shares of Apple and just over 600 million shares of Bank of America on June 30. Investors likely will have to wait until mid November for the company’s 13-F report on its third-quarter equity holdings for an update.

Berkshire’s operating earnings are expected to rise 22% to $8,573 per Class A share in the third quarter, for a total of more than $12 billion, boosted by strength in the company’s insurance operations. There was relatively little hurricane activity in the period, so catastrophe losses likely will be low. And Geico, Berkshire’s auto insurance unit, likely had another strong quarter because it rolled out big price increases over the past two years.

The point to remember is that good news can be bad news for Berkshire in insurance. High profitability industrywide leaves insurers with ample capital, so they tend to cut prices of coverage to put that cash to work. Insurance stocks have been weak recently and that likely has weighed on Berkshire as well.

KBW analyst Meyer Shields recently downgraded Berkshire to the Underperform from Market Perform, citing the insurance outlook and the risk to the company as it transitions to a time when Buffett is no longer CEO. He sees 2026 earnings of $31,750 per Class A share, unchanged from 2025.

Berkshire’s book value is expected to have risen about 4% quarter over quarter to $485,000 per Class A share, helped by gains in the equity portfolio. That means the stock now trades around 1.5 times that estimate, in line with the five-year average but down from a peak of 1.8 times in early May.

Book value likely is higher now because the stock market has risen so far in the fourth quarter. It could approach $500,000 per Class A share by year end. Growth in book value, or shareholder equity, could support Berkshire stock because the shares long have tracked gains in that metric.

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