Profit jumps 82% at Buffett's firm but virus hurts business

OMAHA, Neb. — Warren Buffett's conglomerate reported an 82% jump in its third-quarter profit as the value of its investment portfolio soared, but Berkshire Hathaway said the coronavirus pandemic continued to hurt its assorted businesses, such as BNSF railroad.

Berkshire said Saturday that it earned $30.1 billion, or $18,994 per Class A share, during the quarter. That's up from $16.5 billion, or $10,119 per Class A share, a year ago. Most of the gains were due to a $24.8 billion improvement in the estimated value of Berkshire's investments, which include large stakes in Apple and Bank of America.

Buffett maintains that Berkshire's operating earnings offer a better view of quarterly performance because they exclude investments and derivatives, which can vary widely. By that measure, Berkshire's operating earnings declined by 32%, to $5.49 billion, or $3,452.45 per Class A share. That's down from $8.07 billion, or $4,943.04 per Class A share, a year earlier.

The four analysts surveyed by FactSet expected Berkshire to report operating earnings per Class A share of $3,587.63.

Berkshire said its revenue slipped by 3% in the quarter, to $63.02 billion. Edward Jones analyst Jim Shanahan said it was impressive to see Berkshire's revenue remain close to last year's level given all the challenges in the overall economy.

"I think you'd struggle to find many, if any, companies that are reporting only modest declines in revenues," Shanahan said.

BNSF said profit fell by 8%, to $1.35 billion, at the railroad as the coronavirus continued to slow freight traffic. Berkshire said the railroad delivered 8% less freight during the quarter, which is better than the second quarter, when volume fell by 18% at the height of the virus-related business shutdowns, but still significantly lower than last year.

Berkshire said its Precision Castparts aircraft parts manufacturing company continued to struggle with the pandemic's impact on aviation, as it reported an 80% drop in its pretax earnings. Precision, which took a $10 billion writedown in the second quarter, said it expected to cut 40% of its workforce by the end of the year.

Berkshire said it spent $9 billion repurchasing its own shares during the third quarter, which is nearly double the record $5.1 billion it spent buying its own stock in the second quarter. But even after the repurchases and a handful of investments Berkshire made during the quarter, the company still held $145.7 billion in cash and short-term investments at the end of the third quarter.

Berkshire continued to hold a massive amount of cash despite buying roughly $2.1 billion in Bank of America stock during the summer and agreeing to pay $4 billion for Dominion Energy's natural gas pipeline and storage business. Berkshire didn't close on the first part of the Dominion deal until earlier this month.

Berkshire also said in August that it had taken stakes of just over 5% in five major Japanese trading houses, but that roughly $6 billion investment was made gradually over the previous year so it also didn't have a big impact on Berkshire's cash in the third quarter.