Berkshire Hathaway Beats Earnings Despite Global Economic Woes

Warren Buffett’s shop topped Wall Street expectations. What was the trick?

Berkshire Hathaway reported earnings on Saturday (more on why in a moment). Warren Buffett’s firm announced that profits topped Wall Street expectations thanks to resilient consumer spending. The firm’s success came despite ongoing trade disputes between the U.S. and China and threats of new tariffs.

The firm’s operating income ticked up to $4.816 per Class A share. That figure is up nicely from the $4,189 that the firm reported in the same period in 2018. The company is now sitting on a record $128.2 billion in cash.

Analysts had expected the firm to report roughly $4,405 per Class A share.

Warren Buffett and Berkshire Hathaway in the Third Quarter

The firm did report weakness in consumer, coal, agricultural, and industrial products, according to Reuters.

The ongoing ESG movement continues to press divestment from coal companies, while investors press for cleantech as a replacement for coal. Meanwhile, the agricultural sector is largely in recession as farmers continue to face long odds due to the going trade dispute.

The firm has struggled to find ways to deploy capital in a time of record-high equity markets. Berkshire did repurchase roughly $700 million in stock during the quarter. That buyback level was the highest repurchase of company stock since 2009. It has now been four years since Berkshire made a major acquisition.

That said, Pershing Square and Bill Ackman are likely very happy with Saturday’s earnings report. Ackman’s hedge fund took a large stake in Berkshire Hathaway during the summer.

Why Does Berkshire Hathaway Report Earning During the Weekend?

Berkshire Hathaway is one of the rare firms that report earnings during the weekend. In 2018, Buffett sent a letter to shareholders explaining the reason for the company’s weekend reporting moves. Buffett has complained about an accounting requirement that he believes can “severely distort” the firm’s earnings report. He also said that the rule can “mislead commentators and investors.”

Buffett is referring to the U.S. accounting rule that requires the firm’s earnings report to account for unrealized gains.

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November 20, 2019

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