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Berkshire Hathaway's Operating Income Jumps 18%

By Jordan Wathen – Mar 2, 2016 at 11:14AM

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The consistency of Berkshire Hathaway's profits shows what an incredible business it really is.

Berkshire Hathaway (BRK.A 1.62%) (BRK.B 1.47%) ended 2015 on a high note, posting operating income of $4.67 billion, an 18% improvement over the same period last year.

Berkshire's Q4 by the numbers
Berkshire breaks out its fourth-quarter results by major business line. Its earnings grew in every single operating segment compared to the year-ago period, with the exception of its railroad, utilities, and energy unit.

  • Insurance underwriting produced $306 million in pretax earnings, a 60% improvement over last year.
  • Investment income from insurance grew by 17% to $1.03 billion.
  • Berkshire's railroad, utilities, and energy segment produced $1.5 billion of pretax profits, shrinking by 3% compared to last year.
  • Its other operating companies produced $1.8 billion in pretax profits, a 36% improvement over last year.

Berkshire's book value per share, the metric by which Buffett has long measured the success of the company, grew by 6.4% during the full 2015 year.

Looking into the results
With every other quarter, Berkshire releases its quarterly report at the same time its earnings release hits the wire. Unfortunately, the Securities and Exchange Commission isn't open on Saturday, so the annual report isn't available at the time of the earnings release.

However, Buffett's annual letter to shareholders provides plenty of insight into what happened this quarter and the future for Berkshire Hathaway as a company. In recapping the last year, Buffett sprinkled a few insightful tidbits about its operating companies.

Its railroad, BNSF, improved in 2015 despite weakness in the industry as a whole. Buffett notes that Berkshire deployed $5.8 billion to capital expenditures at its railroad unit, which improved service for its customers. Pretax income for the railroad reached a new record of $6.8 billion in 2015, $606 million more than in 2014.

The "Powerhouse Five" companies -- BH Energy, Marmon, Lubrizol, IMC, and BNSF -- produced a whopping $13.1 billion in pretax earnings, which was a $650 million increase over 2014. Buffett looked forward to renaming this group the "Powerhouse Six" next year, when its results will include Precision Castparts, which it recently acquired for $32 billion.

Buffett noted that if Berkshire's operating companies were stand-alone companies, it would control 10.25 companies in the Fortune 500. (Its stake in Kraft Heinz is one-fourth of a company.)

Even Berkshire's "baby" operating companies are putting up incredible amounts of earnings in the aggregate, generating $5.7 billion in pretax operating income in 2015, up from $5.1 billion in 2014.

Praising its insurance operations once again, Buffett declared that Berkshire's insurers are its single largest source of "unrecorded wealth" on its balance sheet. He went so far as to say that after 48 years in business that he believes the insurers' performance "can't be replicated."

Suffice it to say that anyone would have a very hard time replicating what Berkshire Hathaway has managed to build over the last 51 years. 

Jordan Wathen has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Berkshire Hathaway. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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