Berkshire earnings decline in the first quarter on slowing economic growth, stock market pullback

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Warren Buffett
Gerry Miller | CNBC

Warren Buffett’s Berkshire Hathaway reported Saturday a decline in first-quarter earnings, as the conglomerate was not immune to a slowing U.S. economy.

The company’s net earnings came in at $5.46 billion, down more than 53% from $11.71 billion in the year-earlier period.

Berkshire’s operating earnings — which encompass profits made from the myriad of businesses owned by the conglomerate like insurance, railroads and utilities — were flat year over year at $7.04 billion. This comes amid a sharp drop in the company’s insurance underwriting business; earnings from the segment dropped nearly 94% to $47 million from $764 million in the year-earlier period.

Earnings from Berkshire’s manufacturing, service and retailing segment jumped 15.5% to $3.03 billion in the quarter, while railroad and utilities earnings increased slightly.

Those operating results came as the U.S. economy contracted in the first quarter for the first time since the onset of the Covid-19 pandemic.

The company also took a big hit from its investments, reporting a loss of $1.58 billion amid a broader market decline. To be sure, Buffett always advises shareholders to ignore these quarterly investment fluctuations.

“The amount of investment gains (losses) in any given quarter is usually meaningless and delivers figures for net earnings per share that can be extremely misleading to investors who have little or no knowledge of accounting rules,” Berkshire said in Saturday’s release.

Berkshire’s stock buybacks also slowed down to $3.2 billion from $6.9 billion in the fourth quarter of 2021, as the company was more active with dealmaking last quarter than it had been for a long time.

In late March, the company said it agreed to buy insurer Alleghany for $11.6 billion — marking Buffett’s biggest deal since 2016. Berkshire also unveiled a stake in oil giant Occidental Petroleum that’s now worth more than $7 billion, along with a position in HP Inc that’ now valued at more than $4.5 billion.

Despite the tough environment, Berkshire as an investment has been stellar this year. The conglomerate’s Class A stock is up more than 7% for the year — outperforming the S&P 500, which is down 13.3% for 2022. While down from the fourth quarter, the company still showed a massive cash hoard of $106.3 billion as of the end of the first quarter.

The company’s latest quarterly figures come as thousands flocked to Omaha, Nebraska for Berkshire’s annual meeting, where Buffett and Vice Chairman Charlie Munger will take questions from shareholders. (CNBC will host the exclusive livestream on Saturday starting at 9:45 a.m. ET.)

Some of the topics Berkshire shareholders will want the pair to discuss include their market outlook — given the recent inflationary pressures and rising rates — as well as more clarity on the company’s succession plan.

Check out all of the CNBC Berkshire Hathaway annual meeting coverage here.

Sophie Tremblay

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