Post by roy on Aug 2, 2014 14:10:00 GMT -5
Price to book is at 1.328 - cheap compared to Berkshire's historic P/B of 1.6 and the buyback level of 1.2 times book.
Berkshire Hathaway reported the company’s net worth during the first half of 2014 increased by 5.6% with book value equal to $142,483 per Class A share as of 6/30/14. The $12.1 billion increase in shareholders’ equity in the first half was due primarily to $11.1 billion in net earnings and an approximate $1.0 billion increase in the net unrealized appreciation of investments (net of applicable income taxes and reclassification of investment appreciation in net earnings).
Berkshire’s second quarter operating revenues rose 8% to $47.3 billion with net income jumping 41% to $6.4 billion. Investment and derivative gains contributed $2.1 billion to earnings, including a $1.1 billion non-cash gain in connection with the exchange of shares of Graham Holdings (The Washington Post) for 100% of the common stock of a subsidiary of Graham Holdings, whose assets included a Miami ABC-affiliated TV station and shares of Berkshire Hathaway’s stock worth $400 million.
Operating earnings (excluding investment and derivative gains/losses) rose 10.5% during the second quarter to $4.3 billion. The operating earnings of the non-insurance businesses increased 19.5% to $2.8 billion. Insurance underwriting earnings declined 22% to $411 million while insurance investment income dipped 1% to $1.1 billion.
The 22% drop in the insurance group’s earnings from insurance underwriting was due primarily to large gains of Berkshire Hathaway’s Reinsurance Group in the 2013 period that were not repeated. Subsequent to quarter end, the Berkshire Hathaway Reinsurance Group entered into a retroactive reinsurance agreement with Liberty Mutual and received $3 billion in consideration. All of Berkshire’s other insurance operations posted strong double-digit gains during the second quarter. Berkshire’s extensive insurance operations again operated at an underwriting profit during the first half. Float of the insurance operations increased 2% from year end and approximated $78.5 billion as of 6/30/14.
Burlington Northern Santa Fe’s (BNSF) revenues continued to chug along with revenues up 8% for the second quarter to $5.7 billion as net earnings rolled 4% higher to $916 million. While volume increased in the second quarter, service levels continued to be “well below internal standards, as well as those expected by customers.” BNSF is working to improve service issues and operating efficiencies with planned capital investments to expand capacity and new employee hiring. During the first half, BNSF’s revenues increased 5% to $11.2 billion with the increase in revenues reflecting a 3% increase in cars/units handled and a 2% increase in average revenue per car/unit. BNSF generated higher revenues from industrial products, agricultural products and coal, with revenues from consumer products relatively unchanged.
The utilities and energy group, recently renamed Berkshire Hathaway Energy, reported that revenues charged 37% higher during the quarter to $4.2 billion with net earnings up 34% to $375 million. These results included the contribution of $808 million in revenues and $121 million in earnings from the recently acquired NV Energy. In addition, all of Berkshire’s other energy businesses reported higher revenues during the quarter with most also generating double-digit earnings growth, with the exception of the natural gas pipelines. The real estate brokerage and other businesses reported revenues increased 29% during the quarter to $775 million, reflecting increases in brokerage revenues primarily due to acquisitions as well as strong increases in revenues from renewable energy projects.
McLane’s revenues increased 3% during the quarter to $11.7 billion with operating earnings trucking 11% higher to $126 million, or 40% higher on an adjusted basis if a gain in the prior year period is excluded. These results reflect increased inventory price change gains and a one-time, sales-based tax refund realized in the second quarter.
Berkshire’s manufacturing businesses reported 8% revenue growth in the quarter to $9.6 billion with operating earnings up 19% to $1.4 billion. Revenues from the industrial businesses led the way during the quarter as Lubrizol’s revenues rose 11% to $1.8 billion, reflecting the impact of bolt-on acquisitions and changes in product mix. Forest River’s revenues motored 10% higher to $1.1 billion, while earnings increased a speedy 29% due primarily to increased unit sales and lower material costs. Iscar’s pre-tax earnings increased 8% during the quarter, reflecting the impact of increased sales volume as well as an increase in gross margins. Marmon’s revenues increased 16% to $1.6 billion with pre-tax earnings jumping 26% to $212 million during the second quarter, which was primarily due to the acquisition of a beverage dispensing and merchandising business at the beginning of 2014 as well as from increased sales and margin expansion in the retail store fixtures and the water treatment sectors. Building products revenues increased 6% during the quarter to $2.7 billion with pre-tax earnings expanding 14% to $294 million. Each business in the building products group generated higher earnings during 2014 with the exception of Shaw, where earnings declined due to lower gross margins. Apparel sales increased 4% during the quarter to $1.1 billion with pre-tax earnings more than doubling to $107 million as Fruit of the Loom benefited from lower manufacturing and pension costs.
Service businesses generated solid revenue and earnings gains during the quarter with revenues up 9.6% to $2.5 billion and pre-tax earnings up 11.7% to $362 million. These results were driven by increases at NetJets, FlightSafety and TTI, along with BH Media Group’s bolt-on acquisitions. Retailing’s revenues and earnings rebounded 7% and 20%, to $1.1 billion and $91 million, respectively. Finance and Financial net earnings increased 21% to $280 million for the quarter due to improvements at Clayton Homes and XTRA.
Berkshire’s balance sheet continues to reflect significant liquidity and a strong capital base of $234 billion as of 6/30/14. Excluding utility and finance investments, Berkshire ended the quarter with $219.5 billion in investments allocated approximately 53.3% to equities ($116.9 billion), 13.3% to fixed-income investments ($29.2 billion), 11% to other investments, including preferred stocks in Bank of America, Wrigley, Dow Chemical and Heinz, ($24.2 billion), and 22.4% in cash ($49.2 billion).
Berkshire’s financial strength allows Buffett to make significant investments and acquisitions. During the first half of 2014, Marmon acquired the beverage dispensing and merchandising operations of British engineering company IMI plc for approximately $1.1 billion. In addition, Berkshire acquired 100% of Phillips Specialty Products, which has been renamed Lubrizol Specialty Products, in exchange for 17.4 million shares of Phillips 66 common stock with an aggregate fair value of $1.35 billion. Berkshire also acquired WPLG, whose assets included a Miami ABC –affiliated television station and $400 million of Berkshire Hathaway stock (2,107 Berkshire Hathaway Class A shares and 1,278 shares of Class B stock), in exchange for 1.62 million shares of Graham Holdings with an aggregate fair market value of $1.13 billion. In addition, Berkshire paid approximately $1.2 billion as final payment in connection with the acquisition of substantially all of the outstanding shares held by Marmon’s non-controlling shareholders. Berkshire Energy announced it plans to acquire 100% of AltaLink, a regulated transmission-only business headquartered in Calgary, Alberta, for approximately $3 billion, which is expected to be funded with a combination of cash and new Berkshire Hathaway Energy senior unsecured debt with the acquisition expected to be completed by the end of 2014.
Free cash flow dropped 30% during the first half to $5.7 billion, primarily due to a $2.8 billion increase in receivables and originated loans and a 28% increase in capital expenditures. During the first half, capital expenditures were $6.1 billion, including $2.4 billion by Berkshire Hathaway Energy and $2.2 billion by BNSF. BNSF and Berkshire Hathaway Energy forecast aggregate capital expenditures of about $6.9 billion over the balance of 2014. During the first half, Berkshire had a net $259 million in sales/redemptions of fixed-income investments and sold a net $907 million in equities. Berkshire’s Big Four equity investments had mixed results during the first half of 2014 with investors blue about IBM’s flat return compared to Coca-Cola’s stock price popping 2%, American Express charging 6% higher and Wells Fargo’s stock banking a substantial 16% gain.
Berkshire Hathaway reported the company’s net worth during the first half of 2014 increased by 5.6% with book value equal to $142,483 per Class A share as of 6/30/14. The $12.1 billion increase in shareholders’ equity in the first half was due primarily to $11.1 billion in net earnings and an approximate $1.0 billion increase in the net unrealized appreciation of investments (net of applicable income taxes and reclassification of investment appreciation in net earnings).
Berkshire’s second quarter operating revenues rose 8% to $47.3 billion with net income jumping 41% to $6.4 billion. Investment and derivative gains contributed $2.1 billion to earnings, including a $1.1 billion non-cash gain in connection with the exchange of shares of Graham Holdings (The Washington Post) for 100% of the common stock of a subsidiary of Graham Holdings, whose assets included a Miami ABC-affiliated TV station and shares of Berkshire Hathaway’s stock worth $400 million.
Operating earnings (excluding investment and derivative gains/losses) rose 10.5% during the second quarter to $4.3 billion. The operating earnings of the non-insurance businesses increased 19.5% to $2.8 billion. Insurance underwriting earnings declined 22% to $411 million while insurance investment income dipped 1% to $1.1 billion.
The 22% drop in the insurance group’s earnings from insurance underwriting was due primarily to large gains of Berkshire Hathaway’s Reinsurance Group in the 2013 period that were not repeated. Subsequent to quarter end, the Berkshire Hathaway Reinsurance Group entered into a retroactive reinsurance agreement with Liberty Mutual and received $3 billion in consideration. All of Berkshire’s other insurance operations posted strong double-digit gains during the second quarter. Berkshire’s extensive insurance operations again operated at an underwriting profit during the first half. Float of the insurance operations increased 2% from year end and approximated $78.5 billion as of 6/30/14.
Burlington Northern Santa Fe’s (BNSF) revenues continued to chug along with revenues up 8% for the second quarter to $5.7 billion as net earnings rolled 4% higher to $916 million. While volume increased in the second quarter, service levels continued to be “well below internal standards, as well as those expected by customers.” BNSF is working to improve service issues and operating efficiencies with planned capital investments to expand capacity and new employee hiring. During the first half, BNSF’s revenues increased 5% to $11.2 billion with the increase in revenues reflecting a 3% increase in cars/units handled and a 2% increase in average revenue per car/unit. BNSF generated higher revenues from industrial products, agricultural products and coal, with revenues from consumer products relatively unchanged.
The utilities and energy group, recently renamed Berkshire Hathaway Energy, reported that revenues charged 37% higher during the quarter to $4.2 billion with net earnings up 34% to $375 million. These results included the contribution of $808 million in revenues and $121 million in earnings from the recently acquired NV Energy. In addition, all of Berkshire’s other energy businesses reported higher revenues during the quarter with most also generating double-digit earnings growth, with the exception of the natural gas pipelines. The real estate brokerage and other businesses reported revenues increased 29% during the quarter to $775 million, reflecting increases in brokerage revenues primarily due to acquisitions as well as strong increases in revenues from renewable energy projects.
McLane’s revenues increased 3% during the quarter to $11.7 billion with operating earnings trucking 11% higher to $126 million, or 40% higher on an adjusted basis if a gain in the prior year period is excluded. These results reflect increased inventory price change gains and a one-time, sales-based tax refund realized in the second quarter.
Berkshire’s manufacturing businesses reported 8% revenue growth in the quarter to $9.6 billion with operating earnings up 19% to $1.4 billion. Revenues from the industrial businesses led the way during the quarter as Lubrizol’s revenues rose 11% to $1.8 billion, reflecting the impact of bolt-on acquisitions and changes in product mix. Forest River’s revenues motored 10% higher to $1.1 billion, while earnings increased a speedy 29% due primarily to increased unit sales and lower material costs. Iscar’s pre-tax earnings increased 8% during the quarter, reflecting the impact of increased sales volume as well as an increase in gross margins. Marmon’s revenues increased 16% to $1.6 billion with pre-tax earnings jumping 26% to $212 million during the second quarter, which was primarily due to the acquisition of a beverage dispensing and merchandising business at the beginning of 2014 as well as from increased sales and margin expansion in the retail store fixtures and the water treatment sectors. Building products revenues increased 6% during the quarter to $2.7 billion with pre-tax earnings expanding 14% to $294 million. Each business in the building products group generated higher earnings during 2014 with the exception of Shaw, where earnings declined due to lower gross margins. Apparel sales increased 4% during the quarter to $1.1 billion with pre-tax earnings more than doubling to $107 million as Fruit of the Loom benefited from lower manufacturing and pension costs.
Service businesses generated solid revenue and earnings gains during the quarter with revenues up 9.6% to $2.5 billion and pre-tax earnings up 11.7% to $362 million. These results were driven by increases at NetJets, FlightSafety and TTI, along with BH Media Group’s bolt-on acquisitions. Retailing’s revenues and earnings rebounded 7% and 20%, to $1.1 billion and $91 million, respectively. Finance and Financial net earnings increased 21% to $280 million for the quarter due to improvements at Clayton Homes and XTRA.
Berkshire’s balance sheet continues to reflect significant liquidity and a strong capital base of $234 billion as of 6/30/14. Excluding utility and finance investments, Berkshire ended the quarter with $219.5 billion in investments allocated approximately 53.3% to equities ($116.9 billion), 13.3% to fixed-income investments ($29.2 billion), 11% to other investments, including preferred stocks in Bank of America, Wrigley, Dow Chemical and Heinz, ($24.2 billion), and 22.4% in cash ($49.2 billion).
Berkshire’s financial strength allows Buffett to make significant investments and acquisitions. During the first half of 2014, Marmon acquired the beverage dispensing and merchandising operations of British engineering company IMI plc for approximately $1.1 billion. In addition, Berkshire acquired 100% of Phillips Specialty Products, which has been renamed Lubrizol Specialty Products, in exchange for 17.4 million shares of Phillips 66 common stock with an aggregate fair value of $1.35 billion. Berkshire also acquired WPLG, whose assets included a Miami ABC –affiliated television station and $400 million of Berkshire Hathaway stock (2,107 Berkshire Hathaway Class A shares and 1,278 shares of Class B stock), in exchange for 1.62 million shares of Graham Holdings with an aggregate fair market value of $1.13 billion. In addition, Berkshire paid approximately $1.2 billion as final payment in connection with the acquisition of substantially all of the outstanding shares held by Marmon’s non-controlling shareholders. Berkshire Energy announced it plans to acquire 100% of AltaLink, a regulated transmission-only business headquartered in Calgary, Alberta, for approximately $3 billion, which is expected to be funded with a combination of cash and new Berkshire Hathaway Energy senior unsecured debt with the acquisition expected to be completed by the end of 2014.
Free cash flow dropped 30% during the first half to $5.7 billion, primarily due to a $2.8 billion increase in receivables and originated loans and a 28% increase in capital expenditures. During the first half, capital expenditures were $6.1 billion, including $2.4 billion by Berkshire Hathaway Energy and $2.2 billion by BNSF. BNSF and Berkshire Hathaway Energy forecast aggregate capital expenditures of about $6.9 billion over the balance of 2014. During the first half, Berkshire had a net $259 million in sales/redemptions of fixed-income investments and sold a net $907 million in equities. Berkshire’s Big Four equity investments had mixed results during the first half of 2014 with investors blue about IBM’s flat return compared to Coca-Cola’s stock price popping 2%, American Express charging 6% higher and Wells Fargo’s stock banking a substantial 16% gain.