Berkshire Hathaway Q4 2024 Profit Nearly Halves to $19.7 Billion from Previous Year
Despite challenges, the company sees robust growth in operating earnings
Berkshire Hathaway’s (BRK.A, BRK.B) fourth quarter of 2024 profit slumped nearly 47% to $19.7 billion, a significant drop from the $37.6 billion reported in the same quarter of 2023.
However, the company saw a surge in operating earnings, which soared by 71% to $14.5 billion in the fourth quarter compared to the previous year.
Berkshire CEO Warren Buffett, in his annual letter, reiterated the importance of operational improvements and disciplined investment to sustain growth and shareholder value in the coming years. This approach, coupled with an expected recovery in various business segments, positions Berkshire Hathaway for potential success in an evolving economic landscape.
The insurance sector, led by notable gains in underwriting profit and investment income, was the primary contributor to this growth. The investment income from insurance operations alone saw a 43% increase, attributed to higher short-term investment balances and favorable yields.
Insurance Sector Leads the Way
The conglomerate’s major business segments include insurance, which remains the most significant by annual operating earnings, followed by manufacturing, service, transport, and retailing. The insurance sector recorded a robust 51% increase in operating earnings. Notably, the insurance business benefited from efficient management and strategic underwriting practices, especially within Geico, which boasted a combined ratio of 81.5%, indicating operational efficiency.
Railroad and Utilities Progress
Berkshire’s railroad operations, particularly through Burlington Northern Santa Fe (BNSF), reported a 1% drop in operating earnings. Despite this, there were improvements in productivity which are expected to boost future earnings. On the utilities front, Berkshire Hathaway Energy (BHE) reported a 60% increase in operating earnings, although this was partly due to lower wildfire loss accruals compared to the previous year.
Manufacturing, Service, and Retail Sectors
The manufacturing, service, and retail sectors witnessed a 4.2% decline in pre-tax earnings. This was mainly due to decreased performance in the service and retail groups, affected by reduced demand and higher operational costs. However, the consumer products group within this segment saw a 10.9% increase in pre-tax profits, driven by higher revenues from companies like Forest River and Duracell.
Stock Performance and Market Outlook
Berkshire Hathaway’s stock outperformed the S&P 500 in 2024, with a 25.5% increase compared to the S&P's 25.0% total return. This reflects the strategic management and long-term investment philosophy advocated by Warren Buffett, who continues to focus on increasing intrinsic business value rather than short-term market trends.
As Berkshire looks ahead, the emphasis remains on enhancing operating earnings and strategically managing capital allocations.
