Berkshire Reports Big Jump in Earnings

Berkshire Hathaway on Saturday reported a sixfold jump in its first-quarter earnings, buoyed by huge paper gains on investments, as the conglomerate led by Warren E. Buffett held its annual shareholder meeting in Omaha, its hometown.

Berkshire, whose vast operations encompass insurance, railroads, utilities and consumer goods, said it earned $35.5 billion in the first three months of the year, up from nearly $5.6 billion in the same quarter a year ago.

With its breadth of businesses, Mr. Buffett’s company is often regarded as a proxy of the American economy, and its results reflected some of the major trends of the moment, including the war in Ukraine, higher interest rates and fuel prices and a drop-off in consumer spending.

Powering Berkshire’s jump in earnings was $31.1 billion in unrealized gains on the investments the company makes using the flood of cash it collects from its insurance operations. That far outstripped the roughly 7 percent gain in the S&P 500 stock index during the quarter.

But, as always, the company warned that it considers paper gains or losses on its investments “meaningless” for understanding its underlying financial health, given how volatile they can be. On the company’s preferred metric of operating earnings, which excludes many of those investment gains, Berkshire earned $8.07 billion for the quarter, up 12 percent from the previous year.

Other core parts of the Berkshire machine reported more mixed results.

Its insurance operations reported $911 million in net underwriting earnings, bolstered in particular by its Geico division, which benefited from higher policy premiums and fewer claims. It also reduced spending on its famed advertising campaigns.

Berkshire’s mammoth BNSF railroad, one of the biggest freight networks in the nation, disclosed a slight drop in net earnings, to $1.2 billion. The company said that while the business benefited from charging higher fuel surcharges and rates per car, it was hit by rising fuel costs and lower shipments.

Its energy and power utilities division reported a sharp drop in net earnings, as higher operating costs offset an increase in revenues and customer usage.

Other businesses whose performance fell in the quarter included its building products group, with its home-construction company, Clayton Homes, suffering from a housing market slowdown brought by a rise in interest rates, as well as its consumer product companies like the Forest River line of recreational vehicles and Fruit of the Loom underwear. “The decline in apparel revenue,” Berkshire said, “was driven by lower volume, as order delays and cancellations persisted in response to the elevated inventory levels of retail business customers.”

During the quarter, Berkshire continued a string of stock buybacks, repurchasing $4.4 billion in its shares. Mr. Buffett has increasingly relied on the financial maneuver to help bolster his company’s performance and use up some of its cash hoard to make up for a dearth of his signature big-ticket takeovers.

Berkshire said it doubled its stake in Pilot, which operates a chain of truck stops, to 80 percent. It also sold $13.3 billion in stock holdings during the period.

The results on Saturday were published as tens of thousands of Berkshire shareholders descended on Omaha for the company’s 59th annual meeting, in large part to hear directly from Mr. Buffett. Long known as the “Woodstock for capitalists,” the hourslong event features Mr. Buffett and his longtime lieutenant, Charlie Munger, answering questions on a wide swath of topics.

This year’s meeting is expected to carry extra weight for many shareholders. Given the ages of Berkshire’s leaders — Mr. Buffett turns 93 this summer and Mr. Munger is 99 — it’s unclear how many more meetings the two will chair.

That said, Mr. Buffett has laid out a plan of succession for his empire: His son Howard will become nonexecutive chairman, while Gregory Abel, a vice chairman who oversees much of Berkshire’s non-insurance operations, would become chief executive. Todd Combs and Ted Weschler, who have overseen parts of Berkshire’s investment portfolio for years, would oversee all of it.