Here's our initial take on Berkshire Hathaway's (BRK.B +0.04%) financial report.
Key Metrics
| Metric | Q4 2023 | Q4 2024 | Change | vs. Expectations |
|---|---|---|---|---|
| Revenue | $93.38 billion | $94.92 billion | 2% | Beat |
| Earnings per share (Class A) | $26,043 | $13,695 | -47% | n/a |
| Operating earnings (per Class A share) | $5,878 | $10,102 | 0.72 | Beat |
| Cash and short-term investments | $325.2 billion | $334.2 billion | $9 billion | n/a |
Strong Operating Results and a Swelling Cash Stockpile
First and foremost, it's important to point out that Berkshire's net income, or "earnings per share," isn't a particularly useful metric. Even CEO Warren Buffett has cautioned against using it. Due to accounting rules, Berkshire must include unrealized gains and losses from its massive stock portfolio, even though they aren't actual profits or losses until Berkshire sells its stocks.
The more important figure to keep track of is Berkshire's operating earnings, which tells us how Berkshire's business is doing. In the fourth quarter, Berkshire's operating earnings were about $14.5 billion, which is 71% higher than the fourth quarter of 2023. For the full year 2024, Berkshire's businesses earned $47.4 billion, representing 27% year-over-year growth.
The biggest reason for the spike in operating earnings in the fourth quarter is Berkshire's insurance business. Underwriting income increased by about $2.6 billion year over year. Plus, investment income (including that from Berkshire's cash stockpile) is included in operating earnings, and since Berkshire's cash swelled throughout 2024, this part of the earnings increased as well.
Beyond insurance and investment income, the results were mixed. Berkshire's railroad income declined a bit, while Berkshire Hathaway Energy's income increased by 15%. Income from Berkshire's other subsidiaries as a whole was roughly flat.
It's worth mentioning that we already knew what Berkshire did in its stock portfolio during the fourth quarter, as it filed its 13-F with the Securities and Exchange Commission about a week prior to earnings. Berkshire opened or added to six stock positions and sold shares of 12 different stocks, and the volume of sales dramatically outpaced the buys. Most notably, Berkshire sold about $5 billion worth of Bank of America stock and reduced positions in a couple of other bank stocks as well.
Cash and Buybacks
With Berkshire's stock portfolio activity in mind, it was likely that Berkshire's cash stockpile would rise even further in the fourth quarter. Not only was Berkshire a net seller of stocks to the tune of several billion dollars, but Berkshire's operating businesses generated a lot of cash, and the company received interest income from the $325 billion in cash it already had.
Well, that's exactly what happened. Berkshire ended 2024 with $334.2 billion in cash and short-term investments on its balance sheet, most of which was invested in short-term U.S. Treasuries.
It was a surprise to many investors when Berkshire reported no share repurchases in the third quarter, but it will likely be less of a surprise to learn that no repurchases took place in the fourth quarter either.
NYSE: BRK.B
Key Data Points
Immediate Market Reaction
Berkshire's earnings reports are unique in the sense that they are always released on Saturdays, so there is no immediate market reaction to report. Warren Buffett chooses to release earnings over the weekend for the specific purpose of avoiding a knee-jerk reaction from the market. He prefers to give investors time to digest the numbers before the market opens.
What to Watch
For one thing, Berkshire also releases Warren Buffett's annual letter to shareholders along with its fourth-quarter earnings report. This year's edition discussed investing mistakes Buffett has made over the years, the company's performance last year, Berkshire's investments in Japan, and details about Berkshire's annual meeting -- and it is definitely worth a read. One significant change is that Buffett's Q&A session at the massive annual meeting will be somewhat shorter than in previous years.
As 2025 goes on, it will be important to keep an eye on Berkshire's stock portfolio and buyback activity, as they can provide important clues about Buffett's general feelings about the U.S. stock market. Based on his recent activity, he seems to believe the market is rather expensive, but this can certainly change.
Helpful Resources
- Full earnings report [link downloads a PDF]
- Investor relations page
- Additional coverage: Warren Buffett Just Pressed the Sell Button on the Stock Market
