Subject: 2Q Summary
My summary of the second quarter report ;-)

Berkshire Hathaway reported the company’s net worth during the first half of 2024 increased by 7%, or $40.4 billion, to $601.7 billion with book value equal to about $418,800 per Class A share as of 6/30/24. Berkshire boasts the largest shareholders’ equity of any U.S. company.

On a GAAP basis, Berkshire reported net earnings of $30.3 billion during the second quarter compared to $35.9 billion in the prior year quarter. Investment gains and losses from changes in the market prices of Berkshire’s substantial equity investments will produce significant volatility in earnings. Berkshire’s five major equity investment holdings which represent about 72% of total equities held, include American Express at $35.1 billion (which charged 24% higher during the first half of the year or $6.7 billion); Apple at $84.2 billion (which Buffett sliced in half was 52% lower or $90.1 billion in value); Bank of America at $41.1 billion (which increased 18% or $6.3 billion); Coca-Cola at $25.5 billion (which popped 8% or $1.9 billion) and Chevron at $18.6 billion (which dipped 1% lower or $200 million in value).

During the second quarter, Berkshire’s revenues rose 1% to $93.6 billion, aided by the improvement in insurance operations. Berkshire’s operating earnings increased 15.5% during the second quarter to $11.6 billion, led by a turnaround in Berkshire’s insurance businesses.

During the second quarter, Berkshire’s insurance businesses generated $2.2 billion from underwriting earnings compared to $1.2 billion in the prior year quarter with the 81% gain due primarily to improved operating results at GEICO and no losses from significant catastrophe events. Insurance investment income increased 40% during the quarter to $3.3 billion, driven by higher interest income from short-term investments in U.S. Treasury Bills. The float of the insurance operations remained flat since year end at about $169 billion.

Burlington Northern Santa Fe’s revenues were relatively unchanged in the second quarter at $5.7 billion. Average revenue per car/unit declined 3.7% due to lower fuel surcharges and business mix changes, offset by a 4.2% increase in car/unit volumes in the second quarter led by 15% growth in consumer products volume and 11% growth in agricultural products volume. Net earnings rolled 3% lower to $1.2 billion during the quarter, negatively affected by litigation charges, but the railroad’s earnings otherwise benefited from improved productivity and lower operating costs.

Berkshire Hathaway Energy reported revenues increased 2% during the second quarter to $6.5 billion. Net earnings decreased 17% to $655 million, driven by a 38% decrease in the U.S. utilities segment reflecting a pre-tax loss accrual for wildfires of $251 million in the second quarter.

During the second quarter, Pilot’s revenues traveled 12% lower to $13 billion with pre-tax earnings increasing 7% to $199 million. The decline in revenue was attributable to lower average fuel prices and a decline in volumes from wholesale fuel and fuel marketing businesses.

Berkshire’s Manufacturing businesses reported second quarter revenues increased 4.5% to $19.8 billion with operating earnings relatively unchanged at $3.1 billion. The industrial products segment led the way for the quarter with revenues rising 4% to $9.2 billion and operating earnings increasing 9.5% to $1.7 billion thanks to improvements at Precision Castparts amid the higher demand for aerospace products and higher volumes and lower raw material costs at Lubrizol. The building products segment revenues increased 3% to $6.9 billion but operating earnings decreased 12% to $1.1 billion. The decline in earnings reflected the increased cost of building Clayton Homes and higher operating expenses. The consumer products segment revenues increased 4% to $3.6 billion with operating earnings up 7% to $382 million. The higher revenues were generated by Forest River, Jazwares and Brooks Sports partially offset by lower revenues from Fruit of the Loom and Richline. The increase in earnings was driven by a 41% increase in apparel and footwear earnings, primarily due to Brooks Sports, the impact of lower product and supply chain costs and the effects of restructuring activities of Berkshire’s apparel businesses in 2023.

Service and Retailing revenues decreased 2.7% during the quarter to $22.4 billion with pre-tax earnings decreasing 20% to $1.1 billion. The Service group revenues were relatively unchanged at $5.2 billion with pre-tax earnings down 23% to $633 million. The earnings decline reflected the impact of lower sales and price competition at TTI, a distributor of electronic components, whose earnings plummeted 50%. Excess inventory levels within supply chains contributed to lower customer demand at TTI with these conditions expected to persist over the balance of the year. The retailing group revenues were down 4.5% to $4.7 billion with pre-tax earnings down 23% to $336 million. Nearly all retailers generated lower earnings in 2024 compared to 2023, reflecting challenging business conditions that contributed to reduced sales and increased operating expenses. McLane’s revenues declined 3% to $12.5 billion due to lower unit volumes primarily in the restaurant business, while earnings increased 10% to $142 million thanks to higher gross margins and lower operating expenses.

Berkshire’s balance sheet continues to reflect significant liquidity and a very strong capital base of $601.7 billion as of 6/30/24. Excluding railroad, energy and utility investments, Berkshire ended the first half of the year with $603.2 billion in investments allocated approximately 47% to equities ($284.9 billion), 2.8% to fixed-income investments ($16.8 billion), 45% in cash and short-term investments ($271.5. billion) and 5% in equity method investments ($30.1 billion), which includes 26.9% ownership of Kraft Heinz and 28.8% ownership of Occidental Petroleum.

Free cash flow increased 20% during the first half of the year to $15.2 billion due to the higher net cash flows provided from operating activities of $24.2 billion. Operating cash flows over the remainder of 2024 will be reduced by significant income tax payments due to the large taxable gains from the sale of Apple and other stocks. Sales of equity securities produced taxable gains of $59.6 billion in the second quarter and $73.7 billion in the first six months of 2024. During the first half, capital expenditures increased 6% to approximately $8.9 billion, which included $5.9 billion for BNSF and BHE, its railroad and utility and energy units. Berkshire expects capital expenditures for the remainder of 2024 for BNSF and BHE to approximate $7.4 billion.

During the first half, Berkshire paid cash of $4.3 billion to acquire equity securities and received proceeds of $97.1 billion from the sale of stocks, including the significant paring of Apple. After quarter end, Berkshire also disclosed the sale of more than $3.8 billion of Bank of America stock. Berkshire purchased a net $94 billion in Treasury Bills and fixed-income investments during the first half of the year. In January 2024, Berkshire acquired the remaining noncontrolling interests in Pilot for approximately $2.6 billion which brought Berkshire’s ownership of Pilot up to 100%.

Berkshire repurchases its shares at prices below Berkshire’s intrinsic value, as conservatively determined by Warren Buffett. During the first half, Berkshire repurchased $2.9 billion of its common stock, including $345 million repurchased during the second quarter, which is the smallest quarterly amount repurchased since the repurchase program began. No shares were repurchased in June and only 100 shares were repurchased in May at an average price of $626,686 per Class A share. Berkshire’s swelling cash hoard to a record $271.5 billion and slowing share repurchases signals that Buffett likely believes that many stocks, including Apple, Bank of America and Berkshire’s stock, itself, are fairly to fully valued at current price levels.