Key facts
- Berkshire Hathaway shares reached a record high following strong earnings and stock buybacks.
- The company's cash reserves fell to $364.7 billion in Q2 from $380.2 billion.
- Berkshire spent $4.5 billion on its own stock buybacks and $23.5 billion on other stock investments in Q2.
- Operating profit rose 16% to $12.98 billion, while net income more than doubled to $25.67 billion.
- Revenue increased 10% in the second quarter.
- Berkshire invested $10 billion in Alphabet and acquired home builder Taylor Morrison.
Berkshire Hathaway's shares climbed to their highest point since Warren Buffett's planned CEO transition was announced, driven by robust second-quarter financial results and aggressive capital deployment.
The conglomerate reported a decrease in its cash reserves to $364.7 billion as of June 30, down from a record $380.2 billion three months prior. This reduction was fueled by significant stock buybacks totaling $4.5 billion and investments in other companies amounting to $23.5 billion during the second quarter. Notably, Berkshire allocated $10 billion to Alphabet, the parent company of Google and YouTube.
Further cash was deployed in July, with at least $10.1 billion spent on additional stock repurchases and the acquisition of home builder Taylor Morrison. These actions signal a proactive approach to capital allocation under the incoming leadership of Greg Abel.
Berkshire's operating profit for the second quarter surged 16% to $12.98 billion. This growth was primarily supported by strong performance in its railroad, service, and certain insurance businesses, which helped offset increased accident claims and advertising expenses at its Geico car insurance unit. Net income more than doubled to $25.67 billion, boosted by paper gains on investments in companies like Alphabet and Apple. Overall revenue saw a 10% increase, breaking a trend of largely stagnant growth seen over the preceding two years.
Analysts reacted positively to the results. Keefe, Bruyette & Woods and UBS both revised their share price targets upward. Meyer Shields of KBW described the quarter as "very solid," while UBS analyst Brian Meredith highlighted the "meaningful" cash deployment as evidence of Berkshire's disciplined capital management. However, Shields maintained an "underperform" rating due to macroeconomic uncertainties and pricing pressures in the property and casualty insurance sector, while Meredith holds a "buy" rating.
In morning trading on Monday, Berkshire's Class A shares advanced as much as 3.3% to $806,102.81, and its Class B shares rose as much as 3.1% to $537.74.