No. of Recommendations: 41
My summary of the first quarter posted with tears in my eyes ;-(
Berkshire Hathaway-BRKB reported the company’s net worth during the first quarter of 2025 increased a modest 1%, or $5.1 billion, to $654.5 billion with book value equal to about $455,055 per Class A share as of 3/31/25. Berkshire boasts the largest shareholders’ equity of any U.S. company, a remarkable achievement under the 60-year stewardship of Warren Buffett.
On a GAAP basis, Berkshire reported net earnings of $4.6 billion during the first quarter, a significant 64% decline from $12.7 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 major equity holdings remained consistent, including American Express, Apple, Bank of America, Coca-Cola, and Chevron, representing 69% of total equity investments. During the quarter, Berkshire’s investments generated a $5.0 billion “paper loss” compared to a $1.5 billion gain in the prior year period. This year’s $5.0 billion loss reflected a $7.4 billion decline in unrealized gains partially offset by a $2.4 billion realized gain from the sale of investments in the first quarter. Most of these sales occurred in Berkshire’s banks, insurance and finance investments and may have included a further trimming of Bank of America stock.
During the first quarter of 2025, Berkshire’s revenues were relatively flat at $89.7 billion as operating earnings declined 14% to $9.6 billion primarily due to a sharp decline in insurance underwriting, mixed results from the manufacturing, service and retailing businesses and a foreign currency exchange loss. Berkshire noted its operating results may be affected in future periods by the impacts of ongoing macroeconomic and geopolitical events, including international trade policies and tariffs which have accelerated in 2025. Considerable uncertainty remains as to the ultimate outcome of these events.
During the first quarter, Berkshire’s insurance underwriting earnings plummeted 49% to $1.3 billion which included after-tax losses from the Southern California wildfires of approximately $860 million. Insurance investment income increased 11% during the quarter to $2.9 billion, driven by higher interest income from short-term investments in U.S. Treasury Bills, partially offset by lower dividend income. The float of the insurance operations rose 1%, or $2 billion, during the quarter to approximately $173 billion. Thanks to insurance underwriting gains in 2025, the cost of this float was negative.
Burlington Northern Santa Fe’s revenues inched ahead 0.6% during the first quarter to $5.6 billion primarily due to a 4.1% increase in unit volume and core pricing gains, partially offset by a decline in average revenue per car/unit due to lower fuel surcharges and business mix changes. Volume growth during the quarter was led by 9% growth in consumer products volume due to higher intermodal shipments from west coast imports and an increase in automotive volume. Net earnings chugged 6% higher to $1.2 billion during the quarter due to the higher volumes and overall improved operating efficiencies, despite the negative impacts of severe weather in February 2025.
Berkshire Hathaway Energy reported revenues increased 1% during the quarter to $6.4 billion with net earnings charging 53% higher to $1.1 billion, reflecting higher earnings from the utilities and energy businesses and reduced losses from the real estate brokerage businesses. The final real estate litigation settlement included scheduled payments over the next four years aggregating $250 million. Cumulative wildfire loss payments by PacifiCorp were approximately $2.75 billion through 3-31-25 of which $1.3 billion have been paid. Estimated unpaid liabilities for the wildfires were approximately $1.4 billion as of March 31, 2025.
Berkshire’s Manufacturing businesses reported revenues increased 1% to $18.8 billion for the first quarter with operating earnings down 7% to $2.7 billion. The Industrial Products segment generated a 2% increase in revenues to $9.1 billion with operating earnings rising 2% to $1.6 billion thanks to improvements at Precision Castparts amid the higher demand for aerospace products. The Building Products segment revenues increased 1% to $6.2 billion, but operating earnings decreased 12% to $855 million. The decline in earnings primarily reflected lower earnings from financial services at Clayton Homes and falling demand and divestitures at other units, such as at MiTek and Shaw. The Consumer Products segment revenues was relatively unchanged at $3.5 billion with operating earnings dropping 30% to $250 million during the quarter. The decrease in earning was primarily attributable to lower earnings from Forest River, Garan, Jazwares and Duracell.
Service and Retailing revenues decreased 6% during the quarter to $32.7 billion with pre-tax earnings increasing 13% to $1.3 billion.
The Service group revenues rose 7% to $5.5 billion primarily attributable to higher revenues from aviation services (+10%) and Integrated Project Services (IPS) (+16%). Pre-tax earnings in the Services group increased 10% to $648 million, primarily attributable to increases from aviation services, the leasing businesses and Charter Brokerage.
The Retailing group revenues increased 2% to $4.6 billion during the quarter with pre-tax earnings down 8% to $293 million. Berkshire Hathaway Automotive (BHA) accounts for 71% of the retailing group’s total revenue. BHA’s 5% increase in revenues reflected higher new and pre-owned vehicle sales as many folks purchased cars during the quarter ahead of the tariffs. Revenues of the other retailers declined 10% during the quarter due a combination of increased competition, sluggish demand and the impacts of higher economic uncertainty. While BHA’s pre-tax earnings were relatively unchanged during the quarter, nearly all of Berkshire’s other retailers generated lower earnings in 2025, partially offset by increased earnings from the home furnishings businesses.
During the first quarter, Pilot Travel Centers’ revenues traveled 17% lower to $10.4 billion due to lower average fuel prices, partially offset by higher fuel volumes, with pre-tax earnings roaring 140% higher to $168 million reflecting asset dispositions and lower interest expenses. McLane’s revenues declined 2% to $12.2 billion due to lower unit volumes primarily in the restaurant business, while earnings trucked 10% higher to $181 million thanks to higher gross sales margin rates.
Berkshire’s balance sheet continues to reflect significant liquidity and a very strong capital base of $654.5 billion as of 3/31/25. Excluding railroad, energy and utility investments, Berkshire ended the year with $637.9 billion in investments allocated approximately 41.3% to equities ($263.7 billion), 2.4% to fixed-income investments ($15.0 billion), 51.4% in cash and short-term investments ($342.4 billion or $328.0 billion net of a $14.4 billion payable for U.S. Treasury Bills) and 4.9% in equity method investments ($31.1 billion), which includes 27.3% ownership of Kraft Heinz and 28.2% ownership of Occidental Petroleum.
While Berkshire holds an extraordinary cash position of about $328 billion, Buffett dismissed the idea that he is stockpiling the cash for his planned successor, Greg Abel, to invest when he is gone. He joked, "I wouldn't do anything nearly so noble as to withhold investing myself just so Greg could look good."
Free cash flow rose 7% during the quarter to $6.6 billion. During the quarter, Berkshire sold $4.7 billion in stocks including those in the banks, insurance and finance sector and purchased $3.2 billion of equity securities in the consumer products sector and the commercial, industrial and other sectors. Berkshire also purchased a net $13.8 billion of U.S. Treasury Bill and fixed-income investments. During the quarter, capital expenditures were relatively unchanged at $4.3 billion, which included $2.8 billion for BNSF and BHE, its railroad and utility and energy units. Berkshire expects capital expenditures over the remainder of 2025 for BNSF and BHE to approximate $11.9 billion.
Berkshire repurchases its shares at prices below Berkshire’s intrinsic value, as conservatively determined by Warren Buffett. There were no repurchases in the first quarter of 2025 aligning with Buffett's disciplined approach to valuation.
We will provide highlights of Berkshire’s annual meeting in our June newsletter However, at the end of the annual meeting, the 94-year-old Buffett announced he would be stepping down as the CEO of Berkshire at the end of this year and passing the baton to Greg Abel, his previously announced designated successor. The retirement news was initially met with shocked silence followed by a prolonged standing ovation from the thousands of shareholders at the meeting with tears running down many faces, including mine. In true Buffett fashion, he joked that the long ovation could be taken in more than one way…. interpreted either as admiration or relief that he was finally resigning.
Perhaps summing it up best, Tim Cook, CEO of Apple, said, “There’s never been someone like Warren, and there’s no question that Warren is leaving Berkshire in great hands with Greg.”
